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Another disaster in the non-QM field as the California-based Athas Capital Group is laying off more than 200 employees due to secondary mortgage market issues.
The mortgage lender’s management announced the decision Wednesday in a letter to business partners and employees reviewed by HousingWire.
According to the documents, Athas will be off and running immediately but will receive a legally binding loan to finance it.
Industry veterans Alim Kassam, Brian O’Shaughnessy, and Kevin O’Shaughnessy founded Athas Capital Group and Rama Capital, an in-house financial arm, during the 2008 national financial crisis.
According to the company’s website, Athas Capital was recognized for “leading the renaissance of ‘sound’ subprime lending.”
Since 2008, it has funded more than 14,000 loans totaling $5.5 billion, making it a top 10 lender excluding QM.
But in today’s mortgage environment, with crazy interest rate spreads and shy investors, non-QM can be a risky space.
As investors seek higher yields as interest rates rise, lenders are busy selling low-interest loans that appeared on the secondary market months ago.
This liquidity issue is a problem with non-QM lenders such as First Guaranty Mortgage Corp. and corner mortgages. Others, like Impac Mortgage Holdings, are dropping their products. Problems before and problems after
Athas management believes that these challenges will continue soon. “Our outlook for the subprime mortgage market is that it will continue to be volatile, becoming increasingly short or deteriorating in liquidity, making it unavailable for a period of time and keeping the loan premium below the cost of production. In many companies, a letter was written to co-CEO Kassam.
CEO Brian O’Shaughnessy told HousingWire that while the company has been successful so far, it has not been able to emerge from a chaotic secondary market.
Athas was doing about $100 million in mortgages a month but was losing millions selling loans to investors.
“If you make $100 million a month and you need 3 points to produce it and you have to sell it for $98, then you lose 5 points or $5 million producing $100 million a month,” he explains. “We knew we didn’t want to burn assets and make mistakes.”
He added: “We chose to leave the market before it gets worse. In this way, we can regulate the company, all loans are paid and can be implemented immediately from employees.”
According to the company, the company raised $ 470 million from 13 other banks since the foundation was set up.
According to O’Shaughnessy, there are about 260 Athas employees, fired last week and have a full salary and salary.
HousingWire found a notice to the California Department of Employment Development that says the company will lay off 29 employees in Irvine, 23 in Los Angeles, and 159 in Calabasas.
Most of the layoffs were wholesale account managers, third-party underwriters, and account managers. Athas management said it was helping the company find work with other lenders.
Athas decided not to “bow” like a gentleman and not go out like his other competitors. We choose to close our business. We will not go bankrupt. We focus on [Rama Capital] fund management,” O’Shaughnessy wrote in a LinkedIn post.
Reference Source: Housing Wire
