For some reason American Freedom Mortgage, Inc. is not on the imploded list yet. American Freedom Mortgage filed for BK Chapter 7 protection on 1/30/2007. However, there is serious evidence of impropriety involving Skystone Mortgage Group, Inc. The CEO of Skystone, Deeann Myers, was the COO of AFM. HSBC is challenging the personal BKs of the CEO of AFM, Tamara Burch, and the COO of AFM, DeeAnn Myers. It is getting ugly due to questionable property transfers and may end up in denials of discharge and investigations. If interested, look up the following and check Wikipedia for AFMI:
1. American Freedom Mortgage, Inc.
210 Interstate North Parkway, Suite 700
Atlanta, GA 30339
Tax id: 58-2598326
Added: 01/30/2007
(Debtor) represented by Stephen J. Sasine
Stephen J. Sasine
Suite 200
5491 Roswell Road
Atlanta, GA 30342
(404) 256-7623
sasinelaw@bellsouth.net
Assigned: 01/30/07
2. Skystone Mortgage Group Inc
280 Cobb Pkwy South
Suite C-305
Marietta, GA 30060
Tax id: 20-4924019
Added: 08/06/2007
(Debtor) represented by Stephen J. Sasine
Stephen J. Sasine
Suite 200
5491 Roswell Road
Atlanta, GA 30342
(404) 256-7623
sasinelaw@bellsouth.net
Assigned: 08/06/07
Both should be IMPLODED; however, take notice of the following:
Friday, February 16, 2007
Ad bill forces mortgage lender out of businessAtlanta Business Chronicle - by Joe Rauch
Print Article Email Article Reprints RSS Feeds Add to Del.icio.us Digg This
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American Freedom Mortgage Inc. is closing its doors because it advertised too much.
The Atlanta-based mortgage lender filed for bankruptcy on Jan. 30 not just because of the softening home market.
According to the company's attorney, Steve Sasine, the company accrued advertising bills that far outstripped its ability to pay.
Company President Tamara Burch could not be reached for comment.
Sasine said the advertising -- primarily television and radio ads -- was placed without Burch's knowledge.
Bankruptcy documents filed by the company as of press time did not provide specifics of the advertising campaigns, nor did Sasine.
The company had a Feb. 14 deadline to file financial schedules with the bankruptcy court.
American Freedom will liquidate the company, known formally as a Chapter 7 bankruptcy filing, and the company's creditors are unlikely to receive payment through the process.
The mortgage lender's bankruptcy filing notes the company has outstanding liabilities of $1 million to $100 million, total assets of less than $10,000, and 100 to 199 total creditors.
Industry observers said the company's mortgage portfolio will likely be sold through the bankruptcy process.
Burch and Chief Operating Officer Ann Myers founded the company in March 2001, according to the company's Web site. American Freedom focused on refinancing mortgages for existing homeowners.
A creditors meeting is scheduled for March 2 at 10:30 a.m. in Room 368 at the Russell Federal Building.
If anyone seriously investigates, I think we will see Tamara Burch, David Burch, DeeAnn Myers, Gregory Myers, and Donald Moreland in handcuffs. As an appraiser, I know that Moreland is a captive closing attorney for AFM. He closes most of his loans at the AFM offices. Now it appears that Donald Moreland a/k/a/ Dot Title, LLC is being sued for a flip in which they had involvement (closed the 1st transaction and ignored the closing instructions on the 2nd). For more information, go to http://www.websitetoolbox.com/tool/mb/cramdisk and search Moreland or "Lender Pressure"
Last edited by James Osterberg, Jr. on Sat Jun 07, 2008 6:19 am; edited 1 time in total
AFM has been added to the imploded list as #21. Skystone Mortgage Group, Inc. not nlisted yet. Also, Rick Fantucci, the VP of Loan Originations for AFM and Skystone is operating an Admiral Lending d/b/a The Equity Network Branch and working closely with Tamara Burch. Anyone know about this?
Last edited by James Osterberg, Jr. on Sat Jun 07, 2008 6:22 am; edited 1 time in total
I think one should inquire as to whether Tamara Burch's husband took any of AFM's assets. My research indicates that his name is David Hal Burch and operates Lazyocular, LLC at www.lazyocular.com. According to the Georgia Secretary of State's web site, Lazyocular and Skystone were incorporated 1 day apart when AFM was being sured and preparing for BK. I wonder if Skystone did not take assets since all AFM employees seemed to end up there. I also wonder if Lazyocular did not take assets since they did the media campaigns for AFM and now do the same thing for others. I hope the BK Trustee looks into this. Screw the customer, file BK, and run off with the assets. Deserves a look.
Last edited by James Osterberg, Jr. on Sat Jun 07, 2008 6:26 am; edited 2 times in total
American Freedom Mortgage
From Wikipedia, the free encyclopedia
Jump to: navigation, search
American Freedom Mortgage, Inc.
Fate Bankruptcy
Founded Marietta, Georgia, 2001
Defunct January 30, 2007
Location Atlanta, Georgia (original headquarters)
Marietta, Georgia (2nd headquarters)
Industry Subprime Mortgage Lending and Alt-A Mortgage Lending
Key people Tamara L. Burch, co-founder, President and CEO
DeeAnn R. Myers, co-founder, Vice-President and COO
American Freedom Mortgage, Inc. (AFM) was a private S Corporation incorporated on February 2, 2001, according to the Georgia Secretary of State, and headquartered in Marietta, Georgia. AFM conducted business as a multi-state direct-to-consumer correspondent lender and mortgage broker specializing in the origination of subprime and Alt-A mortgage loans. AFM also operated a wholesale mortgage lending division that originated loans via approved mortgage brokers and which used the fictitious name AFMI Funding. As of January 1, 2006, the CEO was Tamara Burch and the COO was DeeAnn Myers. Prior to co-founding AFM, both Burch and Myers were loan originators with St. Louis, Missouri-based American Equity Mortgage, Inc., a leading subprime mortgage lender.[1]
According to a Wall Street Journal article, AFM originated loans for a fee, then sold them to investors such as HSBC Mortgage Services, Inc. and mortgage-finance company Countrywide Financial Corporation. [2]
On January 30, 2007, AFM and Burch both filed voluntary "no asset" Chapter 7 bankruptcy petitions in the United States Bankruptcy Court for the Northern District of Georgia.[3] Both the AFM and Burch bankruptcy cases were subsequently converted to "asset" cases by the Bankruptcy Trustee after assets for distribution to unsecured creditors were discovered.[3]
Contents [hide]
1 Subprime and Alt-A Mortgage Lending Activities
2 Subprime Mortgage Crisis and Bankruptcy
3 See Also
4 References
5 External links
[edit] Subprime and Alt-A Mortgage Lending Activities
At the beginning of 2006, AFM was a leading subprime and Alt-A mortgage correspondent lender and mortgage broker in the United States. Subprime mortgage loans are riskier loans in that they are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history. Subprime borrowers are generally defined as individuals with limited income or having FICO credit scores below 620 on a scale that ranges from 300 to 850. Subprime mortgage loans have a much higher rate of default than prime mortgage loans and are priced based on the risk assumed by the lender. Alt-A loans are generally prime (i.e., FICO credit scores of 680 or higher) or near-prime (i.e., FICO credit scores from 620 - 679) loans with some form of reduced documentation requirements (e.g., "stated income", "stated assets", "no income verification").
Although most home loans do not fall into this category, subprime mortgages proliferated in the early 2000s. Subprime mortgages totaled US$600 billion in 2006, accounting for about one-fifth of the U.S. home loan market.[4]
[edit] Subprime Mortgage Crisis and Bankruptcy
As with many subprime mortgage lenders, AFM experienced financial difficulties in 2006 due to repurchase demands from investors and diminished funding capacity because of an increase in non-performing loans. In August of 2006, AFM held an auction at its corporate headquarters to sell most of its assets.[5]
In February of 2007, HSBC Mortgage Services, Inc. commenced litigation against AFM in the Northern District of Illinois based on assigned loans that resulted in early payment defaults, a repurchase event pursuant to the governing loan purchase agreement.[6] Court documents indicate Countrywide Financial Corporation was also demanding repurchase of some loans it purchased from AFM. In March of 2007, the Wall Street Journal reported that many lenders, including HSBC Mortgage Services, Inc. and Countrywide Financial Corporation, have demanded AFM repurchase loans pursuant to repurchase provisions contained in loan purchase agreements. [2]
AFM's financial difficulties were exacerbated by advertising commitments that exceeded the company's ability to meet.[3] David Hal Burch, Tamara Burch's husband, was the Director of Marketing for AFM and responsible for AFM's advertsing campaigns. The financial difficulties created by the advertising obligations and the commenced and threatened litigation culminated in the above-referenced Chapter 7 bankruptcy filing for both AFM and Burch on January 30, 2007.
After resigning as COO, Myers incorporated Skystone Mortgage Group, Inc. on May 23, 2006, according to the Georgia Secretary of Stated, but announced in March of 2007 that it was no longer accepting loan applications due to lack of funding capacity. On August 6, 2007, Skystone and Myers both filed voluntary "no asset" Chapter 7 bankruptcy petitions, as did AFM and Burch. David Hal Burch, was listed as a Skystone employee and organized LazyOcular, LLC on May 22, 2006, one day after the incorporation of Skystone.
As of July 2007, while both the AFM and the Burch bankruptcy cases are pending, Burch was operating a net branch for Admiral Lending LLC, doing business as TheEquityNetwork.com.
[edit] See Also
United States housing bubble
2007 subprime mortgage financial crisis
mortgage
Subprime Mortgage Lending
Alt-A Mortgage Lending
Collateralized debt obligation
List of entities involved in 2007 finance crises
United States housing market correction
Phillip E. Hill, Sr.
[edit] References
^ "American Equity Mortgage acquires Integrity Mortgage", St. Louis Business Journal, 2004-06-02. Accessed 2007-08-12
^ a b Mollenkamp, Carrick; James R. Hagerty, Randall Smith. "Banks Go on Subprime Offensive", Wall Street Journal, 2007-03-13. Retrieved on 2007-08-12.
^ a b c Rauch, Joe (2007-02-19). Ad bill forces mortgage lender out of business. Atlanta Business Journal. Retrieved on 2007-08-12.
^ Waggoner, John. "Q&A on subprime lending sheds light on issues" (reprint), Chicago Sun-Times, 2007-03-25. Retrieved on 2007-08-12.
^ Advertisement for auction.
^ HSBC Mortgage Services Inc. v. American Freedom Mortgage, Inc..
[edit] External links
Example of television ads
American Freedom Mortgage, Inc. listed as #21 on the Imploded Lender List
Retrieved from "http://en.wikipedia.org/wiki/American_Freedom_Mortgage"
Last edited by James Osterberg, Jr. on Sat May 31, 2008 7:29 am; edited 1 time in total
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Yes, He is the Author of several posts on this forum under "RickF". It also appears he is still following Tamara around.
Michelle 01/08/08 at 07:31 PM #3
--------------------------------------------------------------------------------
Speaking of Tamara, she had her house listed through her realtor mother (the "featured listing" on http://lucyloraine.point2agent.com/) on January 2, 2008 despite the fact it should be part of her bankruptcy case which has not been dismissed. I was told when I filed a claim against AFM that the house is upside down. The askijng price is somewhat curious for the market and location:
"Fantastic 4 Story Home" More Photos »
Solid Source
Lucy Loraine
Email Lucy
Cell: 678-520-3538
Details
Address: 4782 Outlook Way NE Type: Residential Style: 3 Story "Traditional" Bedrooms: 7 "Room for everyone" Bathrooms: 5 "full bath on main level" Garage: 4-Stalls, Attached "3 on main level - 1 in LL" Basement: Yes, Walkout "work shop & storage" Size: 0 sq. ft. "3 finished level + full basement" Lot Type: Rectangular Year Built: 1998 "kitchen & bath updated" Taxes: $4,801.00 (2007) MLS: 02296674
Description
Seller will consider lease purchase. Awesome home for growing family and entertaining. This home boasts 7 Bdrms - 5 full baths (most updated this year) and a gourmet kitchen w/granite, stainless steel, pull out pantries, tons of cabinets and counter space, separate ice maker and wine refrigerator. The home has 4 levels from the back with two decks, two terraces plus inground heated pool. There is a sitting room off the master w/fireplace, 2 trey ceilings, private balcony and huge bath. New carpet throughout home. Terrace level boasts, 3 bdrms, full bath, 2 familiy rooms, an art room and exits onto the 1st terrace overlooking the pool area.
Highlights
▪ Kitchen updated 2007 w/ granite counters, stainless steel appliances, tons of cabinets & pull out pantries. Oversized refrigerator, double oven, microwave - island cook top w/ additional cabinets ▪ 2 story family room w/ wall of windows, ceiling fan, fireplace and hardwood floors open off kitchen/breakfast area.
▪ 2 story entry foyer boasts custom tile inlaid floor and hardwood floors open to formal dining room and living room and private office or library w/ built in bookcases. ▪ Main floor full bath professionally done in 2006 w/custom tile work on walls, floors and ceiling.
▪ Upstairs laundry room just redone w/ new cabinets is close to 4 bdrms and 3 full baths making laundry days so much easier. ▪ Two bdrms on the upper level share a full bath while one guest bdrm has it's own private bath making it perfect for company or that teen that needs privacy.
▪ The master boasts 2 trey ceilings, a ceiling fan & large sitting room w/ fireplace. Private balcony off the bdrm, a large bath w/ jetted corner tub, separate shower, dual vanities & walk in closet. ▪ Terrace level features 3 bdrms, full bath (just updated) 2 rec rooms and art room w/built in storage & sink - Fench doors to covered terrace, spriral staircase & overlooks in ground heated pool
▪ Bottom level has 4th garage, work shop and tons of storage space and opens to fenced pool level patio with beautiful stone work surrounding pool.. ▪ New carpet on upper level in all bedrooms (hardwoods in halls and sitting area) - new berber carpert in lower stairway and lower level bedrooms and rec rooms.
Features
Interior Features ▪ Carpeted Floors ▪ Cathedral Ceiling ▪ Ceiling Fan
▪ Fireplace ▪ Hardwood Floors ▪ Laundry Room
▪ Vaulted Ceiling ▪ Window Covers ▪ Wine Storage
Cooling ▪ Central Air ▪ Zoned
Exterior Finish ▪ Stone ▪ Stucco
Sewer/Water Systems ▪ Public
Roof ▪ Asphalt Shingles
Lot Features ▪ Corner Lot ▪ Deck ▪ Fenced Yard
▪ Front Porch ▪ Landscaped ▪ Lawn
▪ Patio ▪ Swimming Pool ▪ Trees / Shrubs
View ▪ Mountain View ▪ Woods
Extra Features ▪ Balcony ▪ Cable Available ▪ Covered Parking
▪ Garage Door Opener ▪ High Speed Internet Available ▪ Intercom
▪ Public Transportation ▪ Storage
Appliances ▪ Dishwasher ▪ Double Oven ▪ Garbage Disposal
▪ Gas Range ▪ Microwave ▪ Refrigerator
?? 01/08/08 at 07:35 PM #4
--------------------------------------------------------------------------------
Not an attorney, but it is my understanding that she must get authorization from the court or trustee. That being said I am not sure she is following all the rules based on some other posts and documents I have read on this site.
Another reason to pay your appraisers: they have long memories and follow the bk proceedings apparantly.
Also, if RickF is that Rick, please explain the appraisal policies of The Equity Network. I have heard some odd things. If not the same guy, has anyone worked with The Equity Network and if so, what is your experience?
Check out REDLINK on this address. You will see who her "go to" appraiser was. 2 Entries one at 3200 sf and one at 5900 sf. How would you like to go behind that appraisal data for a drive by???????....Tax Man says 3200 GLA.
BobM 01/08/08 at 10:48 PM #7
--------------------------------------------------------------------------------
Jerry, why do you think that? Very curious.
RickF is not Rick Fantucci. I have met both of them. RickF is a proponent of serious appraisers policing themselves and not blaming others by erecting barriers to entry and demanding bad appraisers to be sanctioned and for licensed to be pulled. He wants to restore the image of our profession. I will let him speak for himself.
Rick Fantucci is a subprime loan officer and the product of American Equity Mortgage and American Freedom Mortgage. At American Freedom he was the head loan officer and trained them all. He was one of the loan officers that demanded numbers to be hit and taught a whole generation of loan officers to do the same. When American Freedom shut its doors, he partnered with for American Freedom employees to start Skystone Mortgage Group. When that failed he learned his lesson and "pays rent" for a net branch to avoid the costs of running a licensed company in today's market.
My Bad.. I just remembered him posting on here several months ago and I thought that it was him and he was trying to be good now. I guess I should have known it wasn't him. To the Real "RickF" my apologies !!!
i remember the afm invasion after the bk filing and many appraisers were discussing their unpaid afm invoices. i think they all have too many troubles now to lurk on this board.
Check out REDLINK on this address. You will see who her "go to" appraiser was. 2 Entries one at 3200 sf and one at 5900 sf. How would you like to go behind that appraisal data for a drive by???????....Tax Man says 3200 GLA.
Money Man,
Did you look at the pictures of the house in the listing? there is no way that there is only 600 sq.ft. on the 2nd floor. looking at the rear picture, looks like they could have added a very large addition. i wouldnt assume that this appraiser was a "go to" appraiser and lied, unless you are good enough to measure the house from the pictures
From the age of the house, I bet there is a 2-story foyer and a 2-story family room, but it still would not take into account a 2,000 SF difference. Future, homes in that development are not 5,000 SF GLA.
Future...I can't measure from a photo but I CAN use common sense. The 2 Att garage is probably between 20-24 ft wide. The dwelloing is maybe 45-52 ft wide....Where is 5900 GLA? The tax assessor and appraiser #1 show around 3200 total GLA, state the basement to be 2392 and 2512 respectfully. That makes 2nd floor to be 3300+ sq ft. I can't see the 2nd floor hanging over the front, side or back of the house from the photo. Where is your size coming from....the attic??????
I am just somewaht amused by the irony. I imagine more than a small number of loans originated by AFM with "teaser rates" went bad and resulted in foreclosure. Now the AFM head honcho seems to be losing her home in a distressed sale. I imagine the high price and questionable appraisal is because the house is upside down and must sale at the inflated amount to cover the negative equity.
future 01/09/08 at 11:51 AM #16
--------------------------------------------------------------------------------
looking at it, it looks like it is 4 levels from the back, 2 being basement.
there does look like their could have been an addition on the back, but i dont want to make an assumption. i think ae might be right.
i am just making the point that we all cant pick and choose when to say "i have to see the house to know what its worth" and when to look at a picture and bash the appraiser for pumping up the gla without being to the house yourself. you cant bash people for doing comp checks and then assume you know an appraiser is wrong by looking at a front and back photo.
The sketch on the Cobb Asessor's site of the footprint of the 1st floor, not including patios, decks, and garages, but including bays, is 1,530 SF. So if there are 4 levels, it is 6,120 SF, not including any area above the garage.
?? 01/09/08 at 11:45 PM #20
--------------------------------------------------------------------------------
The other AFM leader and the Skystone Mortgage CEO, Ann Myers, sold her GA home and moved back to Missouri and is also selling her home. Poetic justice, call me evil.
Property Information:
Address:
Map / Satellite 3103 S Black Forest Avenue
Blue Springs, MO 64015
Plan Name: Rockhill Dream
Price: $279,900 - Mortgage Calc
To go full circlw, is the Rick Fantucci home for sale?
Snoop 01/11/08 at 11:22 AM #22
--------------------------------------------------------------------------------
According to the other/realtor, the Tamara Burch home is not part of the bankruptcy and the Burches just want to downsize:
From the Desk of Lucy Loraine 10-Jan-2008
Dear Michelle,
This home is not in a bankruptcy and is available for sale. The seller's have decided to downsize at this time. If you are interested in seeing this home please just let us know.
Thanks
Lucy
Thinking of making a move...
Whether you are buying a new property or selling your existing home, I have what it takes to assist you with your real estate needs. Visit my website and experience the state-of-the-art property marketing and home search tools I have made available to assist my prospects through their real estate transactions.
Downsize? I think "downsize" means cannot cash flow anymore now that our companies have failed miserably and we cannot make the payments. I agree with the response above ... poetic justice. She can go sell cars or work a check-out line or live in a box. They deserve this.
Has anyone else who leaves an e-mail received a threat from the Tamara Burch Corrupt Industrial Complex? Just curious. I told her to tend to her own problems.
Devil's Advocate 01/17/08 at 09:17 AM #25
--------------------------------------------------------------------------------
Stinky, funny you should say that. I was not even in this thread until now and received a threatening email from someone. Didn't even know what he was talking about until I did a search on the forum for the email name that was threatening me.
Real mature. We are all doing well. Much better tha most according tro the "fees" posts on this site. Some of you should see a shrink about the bitterness you hold. If you put all eggs in one lender, then you deserve your misery.
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Banks Go on Subprime Offensive
HSBC, Others Try to Force
Struggling Smaller Players
To Buy Back Their Loans
By CARRICK MOLLENKAMP, JAMES R. HAGERTY RANDALL SMITH
March 13, 2007; Page A3
Amid mounting defaults in the market for subprime mortgages, some big banks and mortgage companies are striking out in their efforts to wrest compensation from originators of those high-risk, high-return loans.
Led by HSBC Holdings PLC, banks and others are trying to force small mortgage lenders to buy back some of the same loans the banks eagerly bought in 2005 and 2006, by enforcing what the industry calls repurchase agreements. Squeezed by the onslaught of defaults, many originators are saying they can't afford to buy back their loans or are pursuing bankruptcy protection.
Yesterday, New Century Financial Corp., one of the nation's biggest subprime-mortgage lenders, said its bank lenders were pulling their funding and that it didn't expect to meet the repayment demands of its creditors. The bank funding allowed New Century to finance loans while waiting to sell them to investors. Last week, under pressure from creditors, the company ceased making new loans.
Subprime mortgages are home loans made to borrowers with weak credit. Subprime-loan originations totaled about $605 billion last year, or about a fifth of the overall market for U.S. home loans, according to trade publication Inside Mortgage Finance.
New Century said yesterday that, starting last Wednesday, it had received a wave of default notices from its major Wall Street creditors, and may owe creditors a combined $8.4 billion for mortgage repurchases. It said if all its lenders demand repurchases, it can't afford to pay. That could force the company into bankruptcy proceedings, where it would join scores of others hurt by the industry meltdown.
A spokeswoman for the Irvine, Calif., company declined to comment on whether it was preparing a bankruptcy filing.
AUDIO CLIPS
On March 2, in federal bankruptcy court in Atlanta, American Freedom Mortgage President Tamara Burch held a meeting with a trustee as well as creditors, including HSBC Holdings PLC. American Freedom had filed for bankruptcy proceedings in January. HSBC has asked American Freedom to repurchase two loans that quickly soured.
• HSBC attorney Suzanne Scheuing of Freeborn & Peters begins her questions of Ms. Burch during the meeting.
Windows Media | Real Audio
• Ms. Scheuing asks Ms. Burch how American Freedom generated revenue.
Windows Media | Real Audio
The largest debt listed by New Century, owed to Morgan Stanley, was $2.5 billion. New Century said that after Citigroup Inc. demanded additional collateral of $80.3 million to cover a "margin deficit" on some of the company's debt last Tuesday, Goldman Sachs Group Inc. filed a default notice on Wednesday, seeking repayment of roughly $100 million. In a filing yesterday, New Century also listed outstanding debts of about $900 million to Credit Suisse Group Inc., $800 million to IXIS Real Estate Capital Inc. and $600 million to Bank of America Corp.
A person close to Morgan Stanley said the Wall Street firm believes its debt is "fully collateralized," meaning the value of the assets backing the debt equals or exceeds the debt's face value. Morgan Stanley advanced New Century a fresh $265 million last week but notified the company on Friday it was "discontinuing financing."
On Thursday, the fresh financing from Morgan Stanley was used to help pay back $717 million that New Century owed Citigroup, the company said yesterday. The same day, default notices came in from Bank of America, Citigroup and IXIS.
Robert Napoli at Piper Jaffray said assuming a 20% loss rate on loans it is forced to buy back from its creditors, New Century "would have to absorb $1.6 billion of losses, essentially wiping out shareholders equity." As of Sept. 30, the company listed $25 billion in assets, about $23 billion in liabilities and $2 billion in shareholders' equity.
SUBPRIME BLUES
• The News: Some big banks and mortgage companies are striking out in their efforts to wrest compensation from originators of subprime mortgages.
• The Background: Defaults are mounting in the subprime market. New Century, a big subprime lender, said its creditors are pulling their funding.
• What's Next: New Century may be forced into a bankruptcy filing.
Although the specifics vary from deal to deal, repurchase agreements obligate the mortgage originator, under some circumstances, to buy back a troubled loan sold to a bank or investor. That obligation sometimes kicks in if the borrower fails to make payments on the loan within the first few months or if there was fraud involved in obtaining the original mortgage. The total volume of mortgages nationwide that might meet those criteria isn't known, but such agreements cover billions of dollars in mortgages.
HSB is dispatching lawyers to U.S. courts to try to collect from mortgage originators, fighting over often-small amounts in a myriad of cases. A few weeks ago, the British bank had a lawyer in Atlanta at the bankruptcy hearing of American Freedom, a mortgage seller that operated from an Atlanta suburb and advertised loans on its Web site called getfree.com. HSBC has demanded American Freedom buy back two loans totaling $255,000 because the borrowers didn't make initial payments.
MORE
• At a Mortgage Lender, Rapid Rise, Faster Fall
• Graphic: Who loses when subprime loans go bad
• Outlook: Fallout May Not Infect Broader Market
The first meeting for American Freedom creditors was held March 2 in the federal bankruptcy building in downtown Atlanta. American Freedom President Tamara Burch's lawyer, and Ms. Burch herself, who barely spoke above a whisper, both said American Freedom faced a slew of repurchase requests.
An HSBC spokeswoman said the bank doesn't comment on pending litigation.
Such demands are helping speed up the sudden downturn in the subprime-mortgage business. Banks like HSBC bought mortgages from ever-smaller brokers and originators to increase their loan volume when the subprime mortgage industry was booming in 2005 and 2006.
HSBC's borrowers included people who couldn't make their first mortgage payments as well as people who misrepresented their income or employment on their mortgage applications, interviews and HSBC's court filings show.
When it is unable to claim its money or believes it will be unable to, HSBC must write off the loans. In 2006, the bank said the loan-impairment cost totaled $6.68 billion for its main U.S. consumer finance business. That was 34% higher than in 2005. The bank has said it may take two to three years to work through its problem loans.
HSBC's top finance chief acknowledges the difficulties in trying to enforce repurchase agreements. "It's proving quite difficult in the sense that many of the parties...don't have the wherewithal" to repurchase the loans, said HSBC Finance Director Douglas Flint.
In one case, HSBC sued a Michigan mortgage company, LFM Services Inc., to force it to buy back five loans HSBC purchased in 2005, according to court documents filed this month in federal court in Illinois. LFM has refused HSBC's repurchase request, the documents show.
Several loans went to what bank executives call "straw borrowers," people who obtain the loan for another home buyer. One borrower, who HSBC said lied about his income in loan documents, turned out to be a straw borrower for a man whose real-estate dealings are being investigated by the Federal Bureau of Investigation, according to court documents. The FBI didn't return telephone calls for comment.
LFM head David Piccinini said, in an interview, that he, too, was defrauded. He said he bought the loans from brokers who wrote the contracts with straw men. "I did not originate these loans. I am a collective victim along with HSBC of fraud that has been perpetrated on me," he said.
American Freedom, Marietta, Ga., made $10 million in revenue in 2005 by originating loans and taking a fee, before selling them on to investors such as HSBC and mortgage-finance company Countrywide Financial Corp. Both of those companies are demanding buybacks of at least some of those loans, court documents show. Countrywide couldn't be reached for comment.
... however, the report of our demise has been greatly exagerrated. Tamara is still originating loans and LazyOcular is hitting on all cylinders. Just because you did not survive the market correction does not mean other did not. Do not understand the hostility, James.
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