Non-QM lender Sprout Mortgage is shutting down operations, multiple workers said on Wednesday.
The company informed the more than 300 workers of the shut down in a conference call on Wednesday, a former staffer said. Sprout had already instituted several rounds of job cuts in the months leading up to the shutdown, the ex-employee said.
The closure of Long Island-based Sprout, headed by industry veteran Michael Strauss, represents the second non-QM mortgage lender to close in recent weeks amid historic volatility. First Guaranty Mortgage Company, controlled by asset management giant PIMCO, abruptly stopped operations less than two weeks ago after encountering turbulence caused by a sharp rise in rates and challenges in selling loans to investors.
In April, HousingWire chronicled the struggles of lenders in the non-QM space as rates surged.
Shea Pallante, the president of Sprout, at the time told HousingWire that the company prefers to “focus our efforts on maximizing production during any changing rate environment. We’re confident that the non-QM sector — and Sprout in particular — will not only ride out the turbulence but outperform expected growth rates.”
The status of loans in Sprout’s pipeline was not immediately clear. A spokesperson for the company did not immediately respond to a request for comment.
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Former employees said Pallante held the conference call at 4:30 p.m. and said the lender would be shutting down immediately. He did not offer severance and employees were quickly locked out of their systems, former employees said. Several staffers told HousingWire that Sprout’s shut down occurred one day before pay day, and they did not receive their pay checks.
In summer of 2021, Sprout announced plans to set up a distributed retail operation, with plans to grow its retail channel through increased direct sales to consumers and residential investors, dedicated brick-and-mortar, and joint ventures. Sprout does most of its business through mortgage brokers. It also has a low-margin correspondent business.
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