Stock car racing team Jesse Iwuji Motorsports (JIM) this week filed a lawsuit against Atlanta-based mortgage lender Equity Prime Mortgage (EPM) for allegedly failing to make more than $4 million in sponsorship payments after the company received a margin call from its investors.
JIM was founded in 2021 by NFL Hall of Fame running back Emmitt Smith and professional stock car racing driver Jesse Iwuji to compete in the Nascar Xfinity Series.
In November 2021, the racing team entered into a contract with EPM. The lender agreed to pay $2.25 million ($187,500 per month) in the contract’s first year, starting in December 2021, documents attached to the lawsuit show. The sponsorship would increase to $3.75 million ($312,500 per month) in the second year, beginning in December 2022.
The lawsuit, filed on Monday at a U.S District Court in Florida, accuses EPM of breach of contract for missing payments.
On Wednesday, a U.S. district judge dismissed the lawsuit without prejudice for failing to
“properly allege the parties’ complete diversity of citizenship, meaning that the Court lacks
sufficient information to satisfy the jurisdictional inquiry.” The judge asked JIM to file a new complaint that properly sets forth the basis for jurisdiction, no later than Dec. 12.
HousingWire reached out to representatives of both JIM and EPM, but neither has responded.
Lenders continue to face tightening profit margins as mortgage rates stay substantially higher than they were last year. In light of this, HousingWire recently caught up with Teraverde’s Rob Peterson to learn more about what lenders need to succeed in today’s lending environment.
Presented by: Teraverde
When the sponsorship was first announced, Smith and Iwuji said they “loved EPM” because the company supported military and diversity initiatives, saying they “put their money where their mouth is,” according to a blog post on EPM’s website.
But in a depressed mortgage market, money has been hard to come by.
The lawsuit claims that on Sept. 29, 2022, an executive at EPM told JIM that the lender wouldn’t be making sponsorship payments starting in October.
“An executive at EPM told an executive at JIM that EPM got ‘margin called’ and was suffering due to mortgage rate hikes,” JIM’s lawyers at Heitner Legal wrote. “Thus, EPM could not make any additional compensation payments to JIM under the EPM Agreement.”
JIM sent a notice of intent to terminate the sponsorship agreement, offering the mortgage lender 30 days to remedy the issues. Still, the mortgage lender took no action, despite receiving benefits, according to the lawsuit.
The racing team alleges it continued to make promotional posts on social media that featured EPM’s logo. The mortgage lender had its logo prominently featured at an October race at Talladega Superspeedway in Alabama, for which EPM’s guests received special access.
The stock car racing team seeks an amount no less than $4.125 million regarding the value of the contract that was not paid ($375,000 for October and November), the remainder of the agreement ($3.75 million for year two), the attorney’s fees, and other reliefs.
Founded in 2008 and led by Eddy Perez, EPM is licensed in 50 states and provides an array of lending products, including conventional mortgages, those insured by the Federal Housing Administration, the Department of Veterans’ Affairs, reverse mortgages, and United States Department of Agriculture loans.
Though it’s mostly known for wholesale lending, EPM does have 14 branches and 86 active loan officers, according to mortgage recruiting platform Modex. EPM’s production volume reached $1.24 billion over the last 12 months but has fallen from $132 million in funded loans in March 2022 to $52 million in October 2022.