Last Friday, the bulk of First Guaranty Mortgage Corporation’s employees were laid off; within a week, the total number cut had risen to 471, nearly 80% of its workforce, and the Plano company had filed bankruptcy.
Earlier this week, the mortgage lender submitted a notice to the Texas Workforce Commission, informing it that 428 of its 565 Texas workers working in the Plano office were let go as a result of the company’s recent restructuring. According to the letter, some employees work remotely from locations outside the state.
First Guaranty Mortgage Corporation (FGMC) explained that it filed for Chapter 11 protection “in order to protect its business and borrowers in the face of significant operating losses and cash flow challenges experienced by the company due to unforeseen historical adverse market conditions for the mortgage industry.”
1987 marked the beginning of operations for First Guaranty Mortgage Corporation. In 2016, it purchased goodmortgage.com, which was based in Charlotte; then, in 2019, it relocated its headquarters to Plano.
The corporation launched a new second mortgage program in June. The target audience for this program was homeowners who desired to access the equity of their houses without generating any rate changes. First Guaranty allegedly stopped taking applications for new customers, according to an article published by HousingWire, which quoted two former workers who said the company has “essentially shuttered.”
Despite the layoffs, FGMC said on Tuesday that it was “continuing to give loans and regularly engage with its users.” The company stated that it has paid wages, paid time off, and paid incentives that have become due; furthermore, it is in the process of issuing severance payments to employees who are eligible for such payments.
To traverse this difficult time successfully, the company said it is “working very closely alongside [its] financial stakeholders.”
The bankruptcy will impact other large companies with ties to the home mortgage lender. For example, the investment management company PIMCO purchased a significant stake in First Guaranty in 2015.
Traditional mortgage lenders are not the only ones feeling the pinch from rising mortgage rates. JP Morgan Chase & Co. announced last week that it would be laying off over 1,000 employees. This decision was made in response to a decrease in the need for home loans. The personnel reductions will affect 75 percent of the company’s employees.
The Dallas Express reported that labor markets around the U.S. appear to be cooling off, prompting concerns that more industries will be affected.