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American Freedom Mortgage, Inc. - Retail

2007-01-30

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stories: bizjournals.com

This is a back-add (added to the list on 2008-01-25) prompted by a very belated but in-depth reply to our Forum inquiry in March of last year.

American Freedom Mortgage (AFM) was a medium-sized retail lender in Marietta, GA. They filed bankruptcy in Georgia's Northern District Court on 1-30-07. The filings indicate there were a number of lawsuits, from equipment lessors to advertising firms, either pending or having gained judgement against the company.

A brief mention in the Atlanta Business Chronicle sited the company's BK attorney as attributing it to "...accrued advertising bills that far outstripped its ability to pay." However, that was not the only reason.

A week later, HSBC filed a criminal suit against the company for the repurchase of two loans at a price of $255,677.58 due to first payment defaults. This was voluntarily withdrawn on 2007-03-19 after HSBC became aware of the BK filing, but anyone who's ever had to deal with a repurchase request knows AFM was aware of it months prior to HSBC's action. HSBC subsequently contested AFM's BK, and to-date it is still dragging on.

According to the "Statement of Financial Affairs" included in the initial filing, AFM had only one office on a lease, and gross revenues for the preceding year were about $5.1 million. Founder and President Tamara Burch gave the only indication we could find of the size of the operation at one point, posting this testimonial for a mortgage consulting firm they had used:

"All of my employees (39 loan officers and managers) came back with a wealth of knowledge and energized - it was well worth sending everyone. My managers purchased the CD's and we are all listening to them. It was great!


-Tamara Burch, Owner and President
American Freedom Mortgage"

According to allmortgagedetail.com, AFM funded over $25 million per month in 2005. Visit our Forum to read more... a LOT more.


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Comments:

DB at 14:21 2008-05-27 said:
American Freedom Mortgage From Wikipedia, the free encyclopedia

American Freedom Mortgage, Inc.

Fate Bankruptcy Founded Marietta, Georgia, 2001

Defunct January 30, 2007

Location Atlanta, Georgia (original headquarters) Marietta, Georgia (2nd headquarters)

Industry Subprime Mortgage Lending and Alt-A Mortgage Lending

Key people Tamara L. Burch, co-founder, President and CEO DeeAnn R. Myers, co-founder, Vice-President and COO

American Freedom Mortgage, Inc. (AFM) was a private S Corporation formed in February of 2001 and headquartered in Marietta, Georgia. AFM conducted business as a multi-state direct-to-consumer correspondent lender and mortgage broker specializing in the origination of subprime and Alt-A mortgage loans. AFM also operated a wholesale mortgage lending division that originated loans via approved mortgage brokers and which used the fictitious name AFMI Funding. As of January 1, 2006, the CEO was Tamara Burch and the COO was DeeAnn Myers. Prior to co-founding AFM, both Burch and Myers were loan originators with St. Louis, Missouri-based American Equity Mortgage, Inc., a leading subprime mortgage lender.[1]

According to a Wall Street Journal article, AFM originated loans for a fee, then sold them to investors such as HSBC Mortgage Services, Inc. and mortgage-finance company Countrywide Financial Corporation. [2]

On January 30, 2007, AFM and Burch both filed voluntary "no asset" Chapter 7 bankruptcy petitions in the United States Bankruptcy Court for the Northern District of Georgia.[3]

[edit] Subprime mortgage lending activities At the beginning of 2006, AFM was a leading subprime and Alt-A mortgage correspondent lender and broker in the United States. Subprime mortgage loans are riskier loans in that they are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history. Subprime borrowers are generally defined as individuals with limited income or having FICO credit scores below 620 on a scale that ranges from 300 to 850. Subprime mortgage loans have a much higher rate of default than prime mortgage loans and are priced based on the risk assumed by the lender. Alt-A loans are generally prime loans with some form of reduced documentation requirements but may also include loans to borrowers with marginal, but not subprime, credit.

Although most home loans do not fall into this category, subprime mortgages proliferated in the early 2000s. Subprime mortgages totaled US$600 billion in 2006, accounting for about one-fifth of the U.S. home loan market.[4]

[edit] Subprime mortgage crisis and bankruptcy As with many subprime mortgage lenders, AFM experienced financial difficulties in 2006 due to repurchase demands from investors and diminished funding capacity because of an increase in non-performing loans. In August of 2006, AFM held an auction at its corporate headquarters to sell most of its assets.[5] In February of 2007, HSBC Mortgage Services, Inc. commenced litigation against AFM in the Northern District of Illinois based on assigned loans that resulted in early payment defaults, a repurchase event pursuant to the governing loan purchase agreement.[6] The financial difficulties and commenced and threatened litigation culminated in a Chapter 7 bankruptcy filing for both AFM and Burch on January 30, 2007.

After resigning as COO, Myers incorporated Skystone Mortgage Group, Inc. in May 2006, but announced in March 2007 that it was no longer accepting loan applications. On August 6, 2007, Skystone and Myers both filed voluntary "no asset" Chapter 7 bankruptcy petitions, as did AFM and Burch. David Hal Burch, Tamara Burch's husband who was responsible for the AFM advertising campaigns, was listed as a Skystone employee.

In March of 2007, the Wall Street Journal reported that many lenders have demanded AFM repurchase loans pursuant to repurchase provisions contained in loan purchase agreements. [2] Court documents indicate Countrywide Financial Corporation was also demanding repurchase of some loans it purchased from AFM.

As of July 2007, while both the AFM and the Burch bankruptcy cases are pending, Burch was operating a net branch for Admiral Lending LLC, doing business as TheEquityNetwork.com. Permalink

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Important: This company is on our list of lending operations that have "imploded". However, please note that "imploded" is a somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or "firesale" acquisition. All information here is provisional, and may contain inaccuracies (especially newer information). If you are planning on doing business with this company or any other one listed on this site, you should inquire with them directly on whether they can still meet your needs. Many are still operating in some capacity.