More troubles for Conn. mortgage firm

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HARTFORD, Conn. (AP) – A troubled Middletown-based mortgage lender plans to lay off more workers this week and has lost a contract to collect mortgage payments for a large corporation.

Mortgage Lenders Network USA, which abruptly shut down most of its operations last month, sent home about 180 employees Friday and told them to expect pink slips Monday, The Hartford Courant reported Saturday.

Including those anticipated layoffs, the company’s cuts in Connecticut will total about 480 jobs, cutting in half the 950 workers that Mortgage Lenders had in the state in December.

Mortgage Lenders Network, which works primarily with people with poor credit, has been seeking an investor to keep its largest lending division afloat.

The company has attributed its problems to increased defaults and the faltering housing market.

In the latest difficulty facing the company, Residential Funding Corp. announced Friday that it is terminating its contract with Mortgage Lenders Network, which collected mortgages from a Wallingford office for the Minneapolis-based corporation.

Mortgage Lenders said two weeks ago that it serviced $19 billion in loans, but company officials would not comment Friday on the Residential Funding Corp. announcement or the amount of potential losses it faces.

The servicing business has generated cash for Mortgage Lenders as its indirect lending business collapsed and its direct-lending business was curtailed.

Significant reductions in its servicing deals could affect its solvency if it is unable to find investors to help keep the company afloat.

“It certainly raises concerns about the company and their income stream,” Connecticut Banking Commissioner Howard Pitkin said Friday.

Connecticut regulators began investigating the company earlier this month after Mortgage Lenders halted its wholesale operation, which makes up about 85 percent of its business, and stopped funding loans or accepting new applications.

All six New England states and Pennsylvania have filed cease-and-desist orders against the company, banning it from making new loans in their states until its financial situation improves. The states also ordered the company to complete loans that had been approved and not yet funded.

Regulators in Connecticut stopped short of pulling the company’s license, allowing Mortgage Lenders to continue its loan-servicing business.

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