Happy 4th of July and the FGMC Fallout continues…..
4th of July – Independence Day
First off, I just wanted to wish everyone a safe and happy 4th of July weekend! I am sure we are all just as happy that it happens to fall on a Monday this year for that coveted three-day federal holiday weekend!
For those interested, here are a couple of quick facts courtesy of History.com:
“Independence Day celebrations goes back to the 18th century and the American Revolution. On July 2nd, 1776, the Continental Congress voted in favor of independence, and two days later delegates from the 13 colonies adopted the Declaration of Independence, a historic document drafted by Thomas Jefferson. From 1776 to the present day, July 4th has been celebrated as the birth of American independence, with festivities ranging from fireworks, parades and concerts to more casual family gatherings and barbecues. The Fourth of July 2022 is on Monday, July 4, 2022.”
FGMC Fallout Continues…
You know there is trouble forthcoming when AEs start sending out emails from their personal accounts that the company has laid off 80% of its employees!
As of Tuesday (6/28/2022) , First Guaranty Mortgage Corporation (“FGMC”) then announced the following:
“We are writing to share an update on First Guaranty Mortgage Corporation’s efforts to address significant, unexpected, and unprecedented economic pressures facing the entire mortgage market.
As you know, the mortgage market faces mounting macroeconomic challenges, including increasing concerns about the availability and cost of credit, the end of the refinance boom, the systemic impact of inflation and geopolitical issues, and reduced demand for purchase money mortgages.”
As a result, FGMC ceased purchasing correspondent loans which also includes their much marketed non-qm loan products closed under the non-delegated channel. From a warehouse bank perspective, there are now millions and millions of dollars of potentially unsaleable non-qm loans that were underwritten to FGMC specific investor criteria. This could have a substantial impact on those correspondent lenders because if they are not able to sell those loans in the secondary market, the end result may be the scratch and dent market where the loans will be sold at a substantial discount
Additionally FGMC has now filed for chapter 11 bankruptcy protection. For those who are unfamiliar, USCourts.gov describes a chater 11 bankruptcy as follows:
“A case filed under chapter 11 of the United States Bankruptcy Code is frequently referred to as a “reorganization” bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money. A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.”
Refine Your Investor Set to Align With Your Core Loan Products
This underscores the importance of having multiple investors who can purchase loan products off of your warehouse line. Whether you are a delegated or non-delegated lender, having multiple options you can sell the loan to post-closing is a proven risk mitigation strategy. In the cases where you only have one outlet for a specific product, i.e., non-qm products, you have to heavily weigh the benefits of improved pricing vs. the worst-case scenario of not being able to sell the loan off your warehouse line.
If you are having difficulty with getting loans purchased off your line or want to discuss what investors and warehouse line providers can help maximize your efficiency and profitability, take advantage of our complimentary 30-minute initial strategy call where we analyze your situation and discuss whether a banker transition process is right for you!
During this call, we will provide practical expertise and understanding of the process from mortgage licensing, investor approval and relations, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, consulting, and more!
SeanS@BrokerToBankerConsulting.com
Call/Text: (714) 844-7146
Sean A. Stephens, Esq., CMB®
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