Posted on 08/16/2003 8:45:08 AM PDT by mrweb
Mortgage company suddenly closes doors
A national mortgage company with operations in Washington abruptly closed its doors yesterday, potentially leaving thousands of homebuyers without loans. Capitol Commerce Mortgage, a Sacramento, Calif.-based company that buys loans and sells them to investors, closed after it likely failed to adjust for rising rates for home loans. The company had an office in Bellevue and total loans of more than $1 billion in Washington, said Chuck Cross, acting director of consumer services for the state Department of Financial Institutions (DFI). "We're hearing that they have closed," Cross said. "They have advised people that they are unable to fund their loans."
Individuals have rushed to lock in record-low interest rates in recent weeks, overwhelming many mortgage processors. Mortgage wholesalers buy home loans from originators and then sell them to investors. Some wholesalers haven't been able to find investors before rates rose. The rate on a 30-year mortgage averaged 6.6 percent as of Thursday compared to a low of 5.31 percent June 11, according to HSH Associates, a New Jersey firm that surveys 2,000 lenders nationwide.
Michelle Bentley, a Capitol Commerce employee in Bellevue, said she and her co-workers were shocked Thursday night when a boss said, "We no longer exist." No reason was given, said Bentley, who had worked as a funder, closing loans since Capitol Commerce opened its Bellevue branch two years ago. The extent of the closure's impact is unclear, though borrowers likely will have to go to another lender and likely pay a higher rate. Since mortgage rates have risen about one percentage point in the last month, for a borrower financing a $270,000 home the difference works out to about $172 a month, said Dean Stewart at Evergreen Pacific Services, a mortgage broker in Renton. "Over the life of the loan, that's a lot of money," he said. "This makes brokers look bad."
Cross said there could be similar closures among small or midsized lenders if they are unprepared for a sudden swing in rates and are holding a large basket of unfunded loans locked in at the low rates.
Cross said Capitol Commerce had assets of more than $400 million last year and made nearly 7,000 loans in Washington, averaging about $168,000 each. The company appeared viable, based on financial statements submitted to the agency in 2001, 2002 and 2003, Cross said. As of late yesterday, Cross' department said it had received two consumer complaints about Capitol. One came from an Enumclaw couple, who reported they had refinanced with Capitol and expected to be signing papers Monday or Tuesday. Yesterday they received a call from their broker saying the company had closed, according to the couple's complaint.
The DFI issued a statement late yesterday that it knows of two out-of-state lenders operating in Washington that have been unable to honor loan commitments in the past few days.
In addition to Capitol, a department spokesman said the other is Tucson, Ariz.-based Fidelity Mortgage Co., a broker that also has an office in Bellevue that continues to operate. It has been the subject of at least 13 consumer complaints filed with the DFI or the state Attorney General's office.
Fidelity attracted homeowners with offers of low-interest mortgages with no closing costs. This month it has sent letters to nearly 50 would-be borrowers in Washington informing them it will not be able to obtain financing for them before their lock-in periods expired. Cross said his agency's preliminary review found no indication Fidelity had violated state law. He said the company apparently acted in good faith, and the standard disclosure documents borrowers received and signed included a clause allowing Fidelity to relock at a different rate if it could not obtain funding for "any reason."
Fidelity president Scott Brittenham said earlier this week that, while "we wish the heck this hadn't happened," the company has done nothing illegal. He said "no one on the planet" could have foreseen the swift jump in interest rates. But some consumers are exploring legal action. Bellevue lawyer Gary Abolofia said a class-action suit for breach of contract is possible. But "people have a right to feel as if they are victims," Cross added.
Among the upset homeowners is John Donovan of Bellevue, who thought he had "a slam-dunk deal" with Fidelity to lower his house payments and finance home improvements. "A rate-lock agreement was signed," he recalled. "There were signed documents from both parties." But Donovan got a letter from Brittenham, dated Aug. 1. "Due to the unusually high demand for mortgage loans this past several weeks," Brittenham wrote, "we will not be able to fund your loan at your fee and interest rate lock agreement within the required time period. We will contact you as soon as we are able to fund your loan."
Brittenham also apologized for "any inconvenience our temporary inability to fund your loan has caused." In an Aug. 8 e-mail to Donovan, Fidelity's regional manager, Ron Greene, wrote: "I completely share your disappointment and frustration. The company let you down and it let every employee in my office down." Brittenham said the company plans to refund customers for out-of-pocket expenses, such as appraisal costs or late-payment fees some borrowers may have been assessed if they did not pay their old lender because they believed they had a new mortgage through Fidelity. But such sweeteners have not appeased all borrowers. Scott Hughes of Snohomish said in a complaint to state regulators that he had been expecting a $50,000 check to pay for home improvements by refinancing through Fidelity. Like Donovan, he got a letter this month from Brittenham pulling out of the deal. "I had no idea this company wouldn't do this," Hughes said. "It was nothing but smoke and mirrors."
Fidelity Mortgage has sued The Seattle Times Co., alleging the newspaper has published false and deceptive information "in regular and ongoing seasonal and weekly mortgage-rate directory articles." The Times has filed papers to dismiss the suit, which is pending in U.S. District Court in Seattle.
Not really. Your house will still be worth the going price of say 300 million dollars, or whatever. But your mortgage payment will stay the same, except for the property taxes and insurance.
However, if the trend is deflationary, you will also win, because it is very unlkely that housing prices will dip below what you paid 10 years ago.
Thanks - me too! The angle of the shot doesn't do it justice, unless one has a thing for admiring garage doors though. I actually took the pic to send off to some pals who wondered what a brick red Santa Fe, complete with purple gates, green walls and a blue garage door looks like.
It's the hip, trendy Mexico City style, I guess.
Actully there is very little money or even true assets that exist. The system is composed mostly of paper assets piled on top of IOU's which are piled on top of paper promises and all based on hype and hope. Fractional reserve banking dictates that credet and debt must continually be expanded for the system to grow. That leads to a lot of abuse and totally fictional inflated values being placed on the assets for loans. Home prices are the most obvious.
Richard W.
No word as yet as to exactly what happened. Capitol is a lender, not a broker, and would commit to borrowers through brokers to "lock" a rate for some period. If rates went up, as they did like Gangbusters in late June, July and August, AND they were not themselves covered (hedged), then they would have to resell the hypothetical $100,000 30-year mortgage "locked" at 5.25% for way less than $100,000 in order that the mortgage would yield a market rate (over 6.0%) when sold. Multiply that times many many mortgages and it's pretty easy to lose millions of dollars quickly. I'm a mortgage broker, in case you wondered, and had one loan ready to close with Capitol Commerce when they ceased funding their loans. I informed my client Friday. We will have to look at other alternatives (they were refinancing) Monday, probably a 5/1 ARM, or they will simply step away from refinancing. They won't lose anything in terms of out-of-pocket costs. If they decide not to go forward, I or my broker will have to pay for their appraisal and other minor fees.
The problem is that the interest rates will be a LOT higher if that happens. I've given it some serious thought and found a 3000 sq ft house out of the way and within 200 yards of a lake inlet. No one can build behind me (Army Corps of Engineer property surrounding the water) and it's within a decent commute to my job (which is fairly stable). The price .. only 160K.
I'm going zero/zero and have a good interest rate on it plus the rebuild cost is substantially higher than my payment price. For me, it's time.
All money is nothing but a mere promise to pay. All assests are valued in monetary value. All value is relative. One man's garbage is another's treasure.
Yes that is true and therefor money itself is now debt since there is nothing backing it. Money is a promise to pay -- pay what?
Richard W.
What gives what backs money value? A promise to pay an agreed upon value, which is also measured in terms of money. Round and round we go! :-]
Doing it one better. VA loan through the Texas Veteran's land board with a .3% discount for building an energy efficient home (current rates are 5.69% updated each Friday and I lock next week). What sucks is that I'm a Gulf War and not a Vietnam Vet (they get an additional 1.24% off)
Mainly I'm buying the bigger house because I REALLY don't want to have to have a 'starter' home. Just move in and stay there for 15-20 years until my son gets out of college.
For Texas Vets : Texas Veteran's Land Board
Money is a promise to pay in goods, services, things, or more money, all of which are subject to fluctuations. Therefore, value is relative. I hope that's clearer.
For once :)
"Commitments made and met"
Capitol Commerce Mortgage is a full service Mortgage Banker organized in 1986, with 15 offices operating in the Western United States.
We are a Wholesale Mortgage Banker, with corporate offices in Sacramento, California. Our day to day lending activities and decisions take place through our local offices directly servicing Mortgage Broker's in Major Metropolitan Areas such as:
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"The Market may change, but our commitment won't" Year after year, Capitol Commerce Mortgage is there for you in good markets and bad, with a dedicated team of mortgage experts. People who know the Industry, take the time to learn your business, and will deliver services that are customized for you. To find out what this can mean for you and your team, please contact our office near you.
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