Hello, LOs!
In just the past two weeks, two major players in the non-QM space have abruptly shut down.
The latest, as you likely know by now, is Long Island-based Sprout Mortgage. During a Wednesday conference call, company President Shea Pallante told employees the lender was to close that day.
Former workers told me severance wasn't offered and pay checks did not arrive Thursday as scheduled.
As with the closure at FGMC, former employees remain mostly in the dark about the circumstances leading to the abrupt decision. But we do know Sprout was forced to securitize or sell its loans, which is no small feat given the current climate. Like FGMC, Sprout funded loans originated by other lenders. There were signs Sprout had cash flow issues – in May, Toms River, New Jersey-based non-QM lender Family First Funding sued Sprout, alleging it did not follow through on an earlier agreement to purchase $5.1 million in loans.
Perhaps most ominous, though, is the consensus among mortgage pros I've spoken to during the past few weeks: Although it's the end of Sprout, this is just the beginning of the now defunct company's troubles.
Many lenders don't have the liquidity or the right hedging strategy in place to survive another bad quarter. So, LOs, I'd like to hear from you: Who do you think may be next to shut down? Please share your thoughts with me anonymously at james@hwmedia.com.
Separately, HousingWire is putting together a series focusing on job opportunities in the mortgage industry. If you know of any, please reach out to me.
James Kleimann
Managing Editor, HW Media
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