New York-based nonbank mortgage lender RealFi (formally known as Residential Home Funding Corp.) laid off employees in December and did not issue their last paychecks or provide a severance package, former workers told HousingWire.
The company’s executives held a conference call with employees on Dec. 15, notifying them about the job cuts because of a “lack of work” and “warehouse lines of credit,” a former underwriter told HousingWire anonymously for fear of retaliation.
“They paid the salary on Dec. 15 and said our last check would be on Dec. 29. Then, on Dec. 28, I received an email stating that they had no funds to pay,” the former underwriter said.
Jodi Mosiello, chief operating officer at RealFi, wrote in the email to employees, which was reviewed by HousingWire, that the company found itself in “unprecedented circumstances.”
“Unfortunately, at the present time, RealFi does not have the funds to pay the monies owed to its employees,” Mosiello wrote. “As money comes in during the restructuring, it is RealFi’s intention to make all employees whole.”
It wasn’t immediately clear what restructuring Mosiello was referring to.
However, two former employees said the company communicated it’s shutting down its mortgage lending business. One of the former employees said the company may continue as a broker shop.
“It shocked everyone as no communications were sent out,” a former employee said. “They have let branch managers and loan officers go and say they are transitioning to a broker [shop].”
A former processor confirmed that “all staff was let go, from operations to loan officers.” In addition, “We did get a check on the 15th. Not the one promised on the 29th. And we were not given a severance package.”
Mosiello did not immediately return a request for comment.
According to the National Multistate Licensing System, RealFi had 10 active loan officers and eight active branches as of Tuesday.
Mortgage tech platform Modex shows about $135 million in mortgage loans originated over the last 12 months, less than half the volume it originated in 2022. Purchases comprised about 66%, conventional loans were 45% and 95% were banked loans.
In August 2023, the Federal Deposit Insurance Corporation (FDIC) filed a lawsuit against RealFi for contractual indemnity — which obligates one party to pay the damages or losses sustained by another party due to certain future occurrences.
The lawsuit relates to loans RealFi brokered to Washington Mutual Bank and its subsidiaries, including Long Beach Mortgage Company, more than 15 years ago. The FDIC was the receiver of Washington Mutual Bank after it failed during the 2008 financial crisis.
“After WaMu funded the loans from Residential Home, WaMu sold Residential Home-brokered loans into residential mortgage-backed securitized trusts for which Deutsche Bank National Trust Company served as Trustee,” the lawsuit states. “The Trustee ultimately asserted claims that it suffered losses because of defective loans sold into the RMBS Trusts, including at least 14 mortgage loans brokered by Residential Home.”
According to the lawsuit, RealFi loan applications and documentation misrepresented borrowers’ credit histories, employment status, income, or occupancy status, among other things. The FDIC said it incurred losses settling it with the Deutsche Bank National Trust Company claims. It’s now going after RealFi.
RealFi did not immediately respond to a request for comments on the lawsuit. Its answer to the complaint is due on Friday, Jan. 5.
