American Equity Mortgage, Inc. - Retail

Tips recently began flowing in on St. Louis, MO based American Equity Mortgage, Inc. (AEM), and the story that unfolded is an ongoing saga that rivals the movie "War of the Roses." To say this a company to 'Watch' is an invitation to a soap opera series. This is what we first heard:

"American Equity Mtg:

• Water & coffee service have been discontinued
• Administrative assistants have been laid off; the remaining have been relegated to part-time.
• They have eliminated their legal and HR dept's
• The current owner owes her ex-husband 16M + interest & penalties; her last appeal w/ the MO Supreme Court has been DENIED.
• They have closed down numerous branches (West Palm Beach, Orlando, San Diego, Detroit, Norfolk, etc...) and still have to pay the leases.
• They're defending a class-action lawsuit from employees
• Top LO's are fleeing like rats from a sinking ship

It's only a matter of "when"; not if."

Former employees and others with "inside information" we contacted told us the company has been losing $1 million a month for the past 4 or 5 months. One source told us they even cancelled Christmas parties this past holiday season. We heard many mid-to-upper level management, sales, support and IT folks left or were let go, and sources also confirmed the elimination of the legal and HR department staff. Another tipster said it is rumored they are having trouble covering their expenses, indicating they may owe as much as $2.5 million dollars for radio advertising and were spending as much as $96,000 a month for security services. Most recently, on 2008-02-06, a class-action lawsuit was filed by Nichols, Kaster & Anderson on behalf of former employees under the Fair Labor Standards Act (FLSA) for unpaid wages and overtime as reported by numerous sources, including The Earth Times, TrenchMice and Ballard, Spahr, Andrews & Ingersoll, LLP. A recruiting link for potential claimants was posted on ClassAction Connect on 2007-12-20.

From another email:

"As I recall, in their best years, their loan volume was several hundred million dollars (just under a billion). They had 400 LO's nationwide; about a hundred or so in operations (St. Louis, MO); and 1 full-time and 1 part-time AA per branch (about 70)."

At present, AEM's web site lists 18 offices in 13 states, with licensing to do business in 26 states. This is consistent with info provided by CityTownInfo.com. The closure of 7 offices and layoff of 40 persons in July of 2007 was reported by the St. Louis Post-Dispatch. Historical copies of their "locations" web page in the internet archive "Wayback Machine" illustrate a contraction, ranging from locations in 28 cities back in December of 2005 to 18 in July of 2007. Annual origination volume dropped precipitously from 2003 ($835,486,000) to 2004 ($337,154,000) and fell to $85,710,000 in 2005 according to reports on AllMortgageDetail.com. All of that is certainly a far cry from the claims made in this profile submitted for AEM's 2004 'Stevie' Award:

"With a loan volume over $2.4 billion in 2004, St. Louis-based American Equity Mortgage is one of the leading mortgage bankers in the country. Operating 43 branches and closing loans in 23 states, the 600-employee company's reach spans from Washington and California to Florida and Maryland. American Equity has received numerous awards for customer service, entrepreneurship and community service."

So where's the soap opera, you ask? This tipster sees it as the root of AEM's troubles:

"If not for the ridiculous sums of money the owner (Deanna Daughtee) spent litigating her divorce, the company probably would have been able to weather this storm."

The divorce and other legal proceedings involving AEM and CEO Deanna Daughhetree is a story that has gripped St. Louis headlines since it began in October of 2004.

In the Jan-Feb 2008 edition of The Flag (a Missouri Bar journal), a summarization of Daughhetree's appeal characterized the case as follows:

"This dissolution matter, which had no child custody or support issues and no requests for maintenance by either party, consumed eleven days of hearings and over 2,700 pages of transcript. The trial court's detailed judgment is 54 pages long. The parties relentlessly visited this court during the pendency of the dissolution and can seemingly agree only that the marriage is irretrievably broken..."

On 2007-11-15, SLtoday.com reported "The Missouri Court of Appeals has turned down Deanna Daughhetee Vinson's appeal to the end of her subprime marriage to fellow mortgage dynamo Ray Vinson." The article goes on to say "Part of the divorce decision requires her to pay her ex-husband $16 million over four years to "narrow the gap" of her receiving the business in the divorce."

Another lawsuit, this one filed by AEM against a former employee, was highlighted in an article from the St. Louis Daily Record on 2006-09-12 starts off "In yet another legal outshoot of the Vinson v. Vinson divorce proceedings..." A counterclaim had been filed "that portrays AEM's West County offices as roiled with drama, armed security guards and constant surveillance while Ray and Deanna Vinson pursued their divorce case from 2005 to 2006." The case was dismissed 2007-09-07.

AEM also filed a preliminary injunction against Vinson Mortgage in August of 2006 "to stop owner Ray Vinson from using a phone number ending in 9999" according to this 2007-05-24 article in the St. Louis Daily Record. Additional background on the case - and the significance of that phone number - was addressed in this Riverfront Times article, entitled "Deanna to Ray: Shut Up!

"It's almost impossible now to turn on the radio without hearing his homespun Southern slang, asking would-be home-equity or bill-consolidation borrowers with "less than perfect credit" to call his number, now with a new 839 prefix.

It's that very voice and those final four numbers - "naahnty-naahn, naahnty-naahn" - that have sparked the most recent legal fireworks, for yet another round of Vinson vs. Vinson."

It sounds like the "Honeymoon is definitely finished at American Equity Mortgage" as the title of this 2005-07-15 article reads from the St. Louis Post-Dispatch archives (available here with free registration).

The fight has led to contempt of court citations, employee firings and combined expenditures of more than $90,000 a month for bodyguards and security by the main characters involved. Another casualty has been one of the St. Louis area's most distinctive radio campaigns.

Contact us if you can provide additional details on recent volume and current staffing levels at this company.