Line cut brings 20-year lender to a standstill
Credit Line Loss Kills Company summed up the fate of Realty Mortgage Corp., a 20-year-old Mississippi mortgage banker that abruptly halted originations and prepared to file bankruptcy after its main credit line was pulled.
The Flowood-based firm, one of the largest privately owned mortgage companies in Mississippi, relied on a warehouse facility of more than $200 million from Countrywide Financial Corp., now a Bank of America subsidiary. When Countrywide froze the line used to fund loans and payroll, Realty Mortgage quickly shut down lending operations and began winding the company down.
Hundreds of staff and a five-state network hit
Realty Mortgage had nearly 300 employees spread across five states, including offices in Mississippi, Florida, Tennessee, Texas and Georgia. Within days of the line being cut, staff in multiple locations were laid off, and phones and websites for the company went dark.
Around 70 Tennessee employees hoped to transition to a new employer, with at least one rival lender exploring the possibility of hiring teams en bloc. For many others, however, the sudden shutdown meant unpaid commissions and uncertainty over benefits and future employment.
Warehouse squeeze claims another casualty
The collapse of Realty Mortgage highlighted how fragile independent mortgage bankers had become as warehouse lenders tightened or cancelled lines in early 2009. Industry groups were already warning that healthy originators could be forced out of business simply because short-term credit disappeared, even when they were producing saleable, agency-eligible loans.
In the weeks that followed, Countrywide released funds to cover final payroll and helped close fully processed loans, but the core business was gone. For MortgageDaily readers, Credit Line Loss Kills Company was another stark reminder that, in the crisis-era mortgage market, access to warehouse funding could be the difference between survival and sudden failure. mortgagedaily.com
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