Problems at Folsom, Calif.- based Central Pacific Mortgage have led to the abrupt shutdown of the mortgage lender amid a growing maelstrom of employee criticism and media confusion over the company’s partial sale to TMSF Holdings, Inc., as originally reported by Housing Wire on February 14. TMSF is best-known for its “The Mortgage Store” retail lending chain. The TMSF purchase involved only the wholesale operations at Central Pacific, say sources close to the transaction, which included six wholesale branch offices with total staff of about 80 operations and sales personnel. The company’s remaining operations, including its Ivanhoe Mortgage division, which employed nearly 260 nationwide, were not part of the purchase transaction. CPM had acquired Orlando-based Ivanhoe, primarily a retail originator, in March 2006; the division produced more than $2 billion in mortgage volume annually, according to company records. Also staying with CPM after the TMSF deal was repurchase risk on loans that had been originated by its wholesale division — and that’s precisely what doomed Central Pacific, according to numerous sources that spoke with Housing Wire. “TMSF carved out the wholesale channel and left the fat on the table,” said one source, who requested his name not be used. “Talk about a win-lose deal — TMSF gets an entirely clean origination channel worth $180 million per month, and CPM is left holding the bag on repurchase claims for an origination channel it no longer owns.”
The same sources also told HW that the volume of repurchases hitting CPM at the time of the TMSF transaction were “enough to matter,” leaving the company with increasing financial liabilities while it simultaneously took a hit to loan production. “Why nobody saw this coming is beyond me,” said a seperate source, on condition on anonymity, who suggested that former CPM CEO John Courson had been less-than-forthcoming with employees regarding the future of the company. In its original press statement announcing its purchase of CPM’s wholesale operations, TMSF said that it planned to operate its newly-acquired wholesale channel as a separate division under the name “CPM Mortgage Services,” and provided a launch date of March 1. “There is no way that Central Pacific could have survived in the state it was in after the TMSF sale,” said the source. “Between rising repurchase claims, the loss of an entire wholesale channel, and an impaired ability to sell subprime product off, this company was doomed the minute it signed the deal.” Numerous sources have suggested to HW that Courson, a former chairman of the Mortgage Bankers Association, perhaps thought he could sell off retail operations before the company’s cash flow ran dry. But that didn’t happen, with the company informing employees on Feb 26th that it would not make scheduled payroll on Feb 28th. Numerous ex-employees of the company have spoken to the media regarding what they see as unfair treatment by the company, as many allege Courson made numerous attempts to assure employees their jobs were safe in the days leading up to the company’s closure. “The moral thing to do would have been to at least give the little people a fair warning,” one former Ivanhoe employee told a local television station in Northern California.
