An Overland Park-based mortgage broker that once employed hundreds of people in multiple states has closed, the latest victim of the mortgage and credit-market meltdowns.
First National Mortgage Sources, which was indirectly owned by First National Bank of Hays, Kan., filed for Chapter 7 bankruptcy this week after letting go of most of its employees at the end of February.
“They were caught in the same situation that a lot of mortgage companies are facing,” said John Cruciani, the broker’s bankruptcy attorney.
The Office of the Comptroller of the Currency, which regulates national banks, removed First National from its list of bank operating subsidiaries in February. As of Feb. 22, the company had stopped locking in loans.
The $94 million-asset bank posted $479,000 in net income last year, down from $1.7 million in 2006.
In its bankruptcy filing, First National Mortgage Sources listed $862,804 in assets and $2.3 million in liabilities. The company’s single biggest asset was a house in Las Vegas valued at $500,000.
Robert Readle, who was hired in January to try to salvage the company, said several factors led to its demise, including the credit crisis and lawsuits by lenders with which First National had relationships. The bankruptcy filing listed 45 lawsuits against the company, many of them by lenders demanding “buybacks” by First National after loans the company brokered went bad.
“A basic problem was that they were involved with several pieces of litigation and had to fund legal fees and expenses,” Cruciani said. “They weren’t able to pay all their mounting legal bills.”
Readle, who had been a credit analyst at the Hays bank, has since returned to the bank.
Cruciani said First National Mortgage Sources had about 95 offices in 22 states and more than 700 employees when it closed. Formerly headquartered at 10901 Lowell Ave., it was moved to Hays recently as part of the winding down of its business, Cruciani said.
A Web site called Mortgage Lender Implode-O-Meter reported that an e-mail First National Mortgage Sources sent in January to its branch managers attributed its woes to “deteriorating mortgage and credit market conditions” that had “adversely affected our operations.”
“As a result, FNMS’s relationship as a subsidiary of First National Bank required recent changes that rendered the management relationship with and capitalization by our parent unworkable,” the e-mail, which Readle authenticated, stated. “FNMS is currently unable to engage in the strategic initiatives that are required to grow and remain competitive in the marketplace.”
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