On June 24, Plano lender First Guaranty Mortgage notified more than 400 of its employees during a virtual call that they no longer had jobs at the company.
According to the company’s WARN Act filing with the Texas Workforce Commission, the mass layoff was the result of “significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility.”
First Guaranty isn’t the only mortgage firm that is shedding jobs as quickly rising interest rates force the real estate market to cool. According to Bloomberg, JPMorgan laid off 1,000 employees from its home-lending division. Insider reported that Wells Fargo cut hundreds of employees in April after its mortgage revenue cratered by more than a third, year over year.
However, the nature of the layoffs — and some candid statements from former employees — suggest that First Guaranty might have had trouble brewing of a different sort.
In a report from National Mortgage Professional, PIMCO — short for Pacific Investment Management Company — bought into First Guaranty in 2015. Former First Guaranty employees cited the loss of this significant investor in March as the likely cause of the layoffs. Some employees in the Friday meeting were suspicious as they had just received pay stubs the day before with additional payouts for accrued paid time off.
The layoffs follow the recent launch of First Guaranty’s “Second Lien Program,” which allowed homeowners to access equity without affecting their rates. Dubbed “Explorer Equity,” the program was modeled after similar programs offered by competing firms:
FGMC’s Second Lien Program, known as Explorer Equity, is currently limited to a Stand-Alone offering; however, the company plans to expand to offer a piggy-back option quickly. Also, with flexible guidelines and expanded credit parameters like a minimum credit score of 680, up to 100% combined Loan-To-Value (LTV), allowance of owner-occupied or second homes, and the ability to qualify despite past bankruptcies, this program increases loan accessibility for borrowers who may not otherwise qualify.
However, First Guaranty’s employee reviews on Indeed.com paint an interesting picture.
There was no job security. There seems to be a history of over hiring, over compensating then laying off. Their way of communicating individual lay offs needs improvement at best.
While the housing market has been overheated due to high demand and inventory scarcity, the company went through a similar pattern of layoffs in 2018. The mass call and layoff sounds eerily like the well-publicized Better.com layoffs that left almost 1,000 workers in a lurch.
As for the company’s future, former employees claim that First Guaranty is “essential shuttered,” according to HousingWire reports.
