A North Texas mortgage company recently laid off a large percentage of its staff.
First Guaranty Mortgage Corporation (FGMC), like many companies in the mortgage industry recently, announced a layoff of much of its workforce. Of 565 staffers, the company laid off 428 employees, 78%, leaving 137 workers.
FGMC offers mortgage loans for new home purchases in 40 states and the District of Columbia. The company also provides a variety of loan products and refinancing.
FGMC CEO Aaron Samples held a virtual meeting with the affected employees to announce the news. According to sources who spoke to National Mortgage Professional, Samples told the former employees that the company faced several economic issues before telling them they had been laid off.
Employees in positions ranging from sales personnel to senior vice president were affected.
In a notice filed with the Texas Workforce Commission on June 24, FGMC explained that it has suffered “significant operating losses and cash flow challenges.”
Such challenges are due, the company said, to “unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility.”
“In addition, FGMC’s recent efforts to obtain funding that could have prevented this layoff have proven unsuccessful,” Cassie Vacante, senior vice-president of human resources, added.
According to HousingWire, the company stopped accepting new mortgage applications. A source also told the market, real estate, and mortgage magazine that the company did not hand out severance payments to the employees.
National Mortgage Professional sources added that FGMC senior executives were not paid their quarterly bonuses. Uncertainty remained regarding whether the former sales staff would be paid their commissions, usually delivered on the 15th of each month.
A spokesperson of the company, however, told HousingWire that the company is working on making severance payments to eligible employees affected by the layoff. The spokesperson also stated that the company had paid salaries and due commissions.
The Plano-based company announced the layoff about six months after Better Mortgage CEO Vishal Garg announced the purging of thousands on a Zoom call with the affected employees. “If you’re on this call, you’re being laid off,” he said, as reported by FOX 4 News.
Since then, companies including Newrez, Interfirst Mortgage, and Loan Depot have followed suit and announced employee layoffs.
According to Business Insider, the recent layoff spike in mortgage companies is because mortgage rates have accelerated at a record pace as the Federal Reserve tightens.
Weekly survey data from Freddie Mac shows the average rate for a 30-year fixed-rate mortgage in the U.S. jumped more than 49% from the end of February to the end of June. The April and May rate spikes followed a March rise that had previously shattered the record for four-week rate increases.
Wells Fargo laid off some of its loan processors and managers working in the Des Moines, Iowa, metro area on April 21.
One of the affected employees told Business Insider that they had expected to get laid off because they had not been getting consistent work.
“If I am not getting constant work and my pipeline is slowing down, something is going on,” said the employee.
The startup Blend does not write home loans, but major U.S. lenders such as Wells Fargo and U.S. Bank use its technologies, tying its fortunes to mortgage companies and lenders.
“These are big movements in a very, very big market,” Tim Mayopoulos, the president of Blend, told Business Insider. “It shouldn’t be surprising to any of us that everybody who’s touching this market is having to think about how to bring their cost structure in line with market realities.”
Blend recently laid off around 200 employees, many of whom were concentrated within its title insurance business.
“This wasn’t about people being poor performers or not being valued members of the team,” Mayopoulos added. “We just didn’t have as much business, and therefore we couldn’t carry as many people.”