Diablo Funding Group Inc. - Wholesale & Retail

"WE AT BAYBANCORP WISH TO SAY GOODBYE!" reports one email announcement we received. BayBanCorp was the wholesale division of Diablo Funding Group.

Under a headline "Diablo Funding closing its doors," the East Bay Business Times says, "One of the largest private mortgage brokerages in Northern California, Diablo Funding Group Inc., is closing its doors. The San Ramon company is shutting down effective this week..."

Located in San Ramon CA, they reportedly had a network of over 650 retail reps. In 2006 according to their web site, they originated over 100 thousand loans.

The shutdown is effective this week according to CEO Anthony Battagello.

At one time, the San Francisco Business Times (according to the company web site) voted them the "Number One Largest Residential Mortgage Broker in the Bay area" for three years in a row.

We heard from more than one source that IndyMac is purchasing the balance of the pipeline, even suggesting Diablo first must go through a BK "before the buyout docs are drawn."

Diablo's shutdown is not without some controversy: why would a company, albeit a Brokerage, run into this type of problem? Why not just scale back and wait it out? Maybe the answer is in the repurchases. One email we got:

"The loans they were asked to repurchase were with BNC. When Lehman noticed a high percentage of loans originating from Diablo going bad, they went for the repurchase option. Diablo refused. Lehman then laid down the law. They refused to accept anything Diablo originated in any of their wholesale lenders, anywhere!"

One of our sources says "the Diablo story that you will read is more whitewashed and PR driven." Therefore we include for the record an internal Diablo memo, unedited as we received it:

All

Yesterday we announced to our Managers our move to IndyMac Bank.

IndyMac Bank is in our opinion the Premiere residential lending platform in the Country. From their technology, to their products, IndyMac Bank is setting the pace for our Industry. The philosophy of the Retail Lending Division is that of a Mortgage Company which revolves around the originator. Because of this we believe it is a perfect match.

IndyMac Bank has their Regional Headquarters also located here in San Ramon.

On Monday the CEO of their Retail Lending Group will travel to Pleasanton to meet with us. Tentatively the time is set for 2:00PM. We will further advise you of the details.

In the mean time, please know that there is much disinformation circulating. Watch out for poachers!

Please speak with your Manager or call Bill, Dean or myself if there are any questions.

Cordially,

A. Battagello

Rumors abound that Diablo is filing bankruptcy today or tomorrow. Stay tuned for updates.

A final quote from The Truth About Mortgages, "It is unclear at this time if loans already in progress will continue to be processed."

If you would like to add to this Implode, drop us a line.