Gateway Funding - Net Branch Operation

Update - 2008-05-14: As reported in the Philadelphia Inquirer, Gateway has acquired the assets of Arlington Capital Mortgage Corp. of Bensalem, PA, making the two "largest mortgage lenders based in the Philadelphia region ... one." Former CEO and President Bruno Pasceri remains at the helm as CEO, while former Arlington CEO Phil Russo, became President of Gateway under the new arrangement.

Previous rumors about owner Michael Karp's retreat from the company were untrue, Pasceri told us, as he (Karp) has now bought out former partner and Gateway co-founder Paul Cantinella and owns 100% of the combined operations.

"I was under a lot of pressure to come after you guys," he said of the Implode-O-Meter. "But I decided to ignore it, because WE knew we weren't imploding, and were fairly sure of the source..." Pasceri alluded to a hostile bidder, but wouldn't divulge any further except to say "Karp stepped in" to cut them off.

"All sales staff and offices" of Arlington were included in the deal, Pasceri said. Prior to finalization, about 30% of Arlington's operational staff, or "between 20 and 40 persons," were let go, he said.

Original ailing/Watch Listing - 2008-01-30: Gateway Funding Diversified Mortgage Services LP may be experiencing some changes and is worth watching. This net branch operation headquartered in Horsham, PA has 41 branches nationwide according to their website and operates in 42 states. Information coming in to us indicates they may be a candidate for merger or sale. From one tipster:

"Keep an eye on Gateway-Funding, who's owner Michael Carp, has bailed out of the company and they are trying to set up a hedge fund to buy the company."

It is interesting that a presumed need for additional capital was acknowledged some months ago as quoted by CEO and President Bruno Pasceri in the Philadelphia Inquirer:

"Pasceri anticipates further difficulties. The banks that lend to mortgage lenders may require them to put up more of their own money for each loan.

"I'm sure that's the next hurdle we're going to have to battle through," he said."

A source within the company who asked to remain anonymous confirmed that Mr. Karp's interest has been or is being bought out, and that a public announcement by either 'the Hedge Fund' or Gateway themselves should be forthcoming in the near future.

The 2008-08-26 article in the Philadelphia Inquirer is titled "Gateway Funding keeps on fighting". And that's exactly what they're doing... in court.

The company was recently (2008-12-06) sued by Aurora Loan Services for a sizable buyback of $8 million in loans sold between 2004 and 2007. They are also fighting four other litigious actions, including one lawsuit filed by a previous employee for sexual harrassment and another alleging multiple TILA violations according to public records.

They have indeed "felt the pain of the industry." More from the Inquirer:

"The privately held company is projecting that it will originate just shy of $3 billion in mortgages this year, 30 percent less than last year and far less than the $5 billion it had budgeted."

CEO Pasceri reported their workforce had been cut by some 100 jobs, down to 749 from over 800 reported back on 2006-07-26 when founder and then MBA chair Regina Lowrie sold her interest to partner Michael Karp. At that time, they had 56 branches and were operating in 41 states.

Gateway Funding Diversified Mortgage Services LP is a privately-owned Pennsylvania company and is not affiliated with Gateway Bank, FSB (San Francisco, CA), Gateway Financial Holdings, Inc (Virginia Beach, VA), Gateway Bank & Trust (Ringgold, GA), Gateway Mortgage Group, Inc. (Boynton Beach, FL), Gateway Mortgage Group LLC (Tulsa, OK and affiliated branches).

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