Frozen Credit Line Topples Mortgage Company
Officials said 20-year-old Mississippi-based Realty Mortgage Corp., one of the largest privately owned mortgage companies in Mississippi, laid off about 300 employees in several states last week after Countrywide Financial Corp. froze its line of credit, according to Yahoo Finance. Representatives at Countrywide, which was acquired by Bank of America Corp. (BAC) in July of 2007, notified Realty Mortgage on Tuesday its line of credit used for payroll and day-to-day operations -- amounting to over $200 million -- would be frozen. Sally Wood, operations manager for Realty Mortgage, told Yahoo Finance Friday the company was still in business and officials were searching for another lender. In the meantime, however, most mortgages have been resold to other lenders with only a small fraction remaining with Realty Mortgage. But in a report Monday, Mortgage Daily.com said it learned Realty Mortgage had suspended operations and plans to file for bankruptcy this Friday. Housing Wire was not able to reach a spokesperson at Realty Mortgage before press time. Realty Mortgage Corp. is headquartered in Flowood, Miss., -- where according to Yahoo Finance, 65 workers were laid off -- and operates out of offices in Florida, Tennessee, Texas and Georgia. Lines of credit are becoming increasingly troublesome to access, as warehouse lenders are going out of business, terminating, or adding restrictions to their lines of credit. In a letter to Treasury Secretary Timothy Geithner Thursday, the Mortgage Bankers Association urged government actions to restore liquidity to the warehouse lending sector. "This assistance by the federal government is urgently needed to maintain the mortgage funding structure borrowers depend upon, especially borrowers who rely on independent, non-depository lenders," read the letter. The MBA recommended the government offer a short-term federal guarantee of warehouse lines that are collateralized by Fannie Mae (FNM), Freddie Mac (FRE), FHA, VA, and RHS-eligible mortgages, and modify the present risk-based capital treatment of warehouse loans to facilitate the expansion of warehouse lending. Write to Kelly Curran at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.