Real Estate

Hometown lenders’ national expansion collided with rising rates.

In bankruptcy court, the Huntsville, Alabama-based mortgage lender says it plans to repay creditors by claiming more than $20 million in tax credits and $1 million from warehouse creditors.

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A non-bank mortgage lender that landed in bankruptcy court as its national expansion plans ran into rising mortgage rates says it can now repay its borrowers by claiming more than $20 million in tax credits and $1 Plans to pay back the million. Claims that this warehouse is owed by creditors.

Hometown Lenders – based in Huntsville, Alabama – also did business as First Family Mortgage. Filed for Chapter 11 bankruptcy protection. on June 3, seeking relief from creditors while it implements their repayment plan.

in this movementAs of April 30, the lender was settling $107 million in claims from tax authorities, former employees, warehouse creditors and general unsecured creditors, attorneys for the Hometown creditors said.

Hometown Creditors’ plan to pay its creditors includes a $22 million Economic Recovery Credit (ERC) claim with the Internal Revenue Service that, if approved, would “provide a large fund from which Both priority and general unsecured creditors can be paid.”

Hometown Lenders is also suing two of its largest warehouse lenders — Flagstar Bank and First Horizon Bank — saying they have funds “that rightfully belong to it.”

According to Hometown Creditor List 40 Largest Unsecured CreditorsFlagstar Bank, in turn, claims it is owed $20.1 million, while First Horizon claims it is owed $3.5 million.

National expansion collided with rising rates.

Organized in 2000, Hometown Lenders “quickly became the largest mortgage banker in Alabama,” according to a Declaration filed by CEO William “Billy” Taylor, Jr.

After expanding to serve borrowers nationwide in 2018, Hometown Lenders had grown to more than 1,400 employees working in 120 offices in 46 states by 2021, Taylor said.

Hometown Lenders continued to expand, opening 18 new branches in 2022, most of them in the first half of the year.

At the same time, the Federal Reserve launched 11 rate hikes that pushed short-term interest rates to their highest levels since 2001.

After mortgage rates, and Taylor said Hometown Lenders saw loan production fall from 1,500 loans per month in Q1 2022 to less than 100 by mid-2023, forcing the company to lay off 1,000 workers.

Hometown lenders were not only making fewer loans, Taylor said, but that resulted in more mortgages being required to be repurchased because investors “were not willing to buy those mortgages at the current rate or were unable to,” Taylor said.

By the end of June 2023, Hometown Lenders had cut nearly 400 workers from fewer than 40 offices. As mortgage rates continue to climb to post-pandemic highs in the fall of 2023, Hometown Lenders closed its doors on Oct. 13 and laid off its remaining employees.

Disputes with warehouse lenders

As an independent, non-bank mortgage lender, Hometown Lenders relied on warehouse lenders to finance the loans it originated and sold to investors such as Fannie Mae and Freddie Mac. Before doing

Hometown Lenders’ primary warehouse lenders were Flagstar Bank, which provided a $60 million revolving line of credit, and a $45 million line of credit from First Horizon Bank. Hometown Lenders also had smaller lines from Georgia Banking Corporation, Norpoint Bank and Southern States.

Taylor said he believed that once all of the loans originated by Hometown Lenders were sold to investors, all of Flagstar’s and First Horizon’s loans were repaid, leaving the company “in these banks.” There should be a surplus of funds.”

Although Hometown Creditors is no longer operating, he said the company expects to file “a number of actions” it believes will “generate funds to satisfy the legitimate claims of preferred and general unsecured creditors.” will be sufficient to pay.”

In addition to Flagstar and First Horizon’s claims, Heath Quick – whose LinkedIn profile Hometown identifies him as the owner of the creditors – he has an unsecured claim of $7 million. Conrad ThompsonA former 1st Family Mortgage Loan originator is currently Nations Lending Corp. , with a claim of $5 million.

Other large unsecured creditors include Freddie Mac ($3.4 million), the IRS ($943,000) and a long list of vendors including ICE Mortgage Technology ($617,000), Rapidscale ($541,000), Certified Credit ($475,000), Equifax Solutions ($475,000), Simplex Solutions ($475,000). 0000, including Simplex Workforce ($475,000). ($400,000) and Black Knight ($289,000).

A meeting of creditors is scheduled for July 9 at the U.S. Bankruptcy Court for North Alabama in Decatur. Creditors have until Sept. 9 to oppose Hometown Creditors’ request to discharge their debt in bankruptcy.

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