First National Mortgage Sources - Net Branch Operation

Update - 2008-04-23: In an article dated April 18th, the Kansas City Star reports First National Mortgage Sources has filed for Chapter 7 bankruptcy. The 263-page petition can be viewed here. The article summarized the case, noting "The bankruptcy filing listed 45 lawsuits against the company, many of them by lenders demanding "buybacks" by First National after loans the company brokered went bad." Bankruptcy attorney John Cruciani was quoted as saying FNMS had "about 95 offices in 22 states and more than 700 employees when it closed."

Update - 2008-02-28: In an announcement on the main page of their web site, First National Mortgage sources says,

"Please be advised that First National Mortgage Sources, LLC ("FNMS") has been removed from the operating subsidiary website by the Office of the Comptroller of the Currency (the "OCC"). FNMS will not lock any new loans after the close of business on February 22, 2008, at 5:00 pm local time (the "Lock Deadline")."

Original Post - 2008-02-25: First National Mortgage Sources, LLC (FNMS) in Overland Park, KS, a subsidiary of First National Bank of Hays City, Hays, KS, had the official rug yanked out from under them on Friday. FNMS is not listed as of today by the Office of the Comptroller of Currency (OCC) among "National Bank Operating Subsidiaries"*. A tipster sent us a copy of this email that went out "to everyone in the company as well as every single vendor and investor" on Friday afternoon, 2008-02-22:

"This message is being sent to all Regional Managers, Branch Managers, Loan Officers and All Other Employees:

Please be advised that First National Mortgage Sources, LLC ("FNMS") has been removed from the operating subsidiary web site by the Office of the Comptroller of the Currency (the "OCC"). FNMS will not lock any new loans after the close of business on February 22, 2008, at 5:00 pm local time (the "Lock Deadline"). You are hereby directed to not lock any new loans after the Lock Deadline."

Branches we contacted were unaware of BMS, and pretty much just as confused and in the dark about the continuation of FNMS.

Other net branches appear to be running for cover. This, from an email we received over the weekend:

"I received a email from a person ... asking to be placed with a fed charter bank and he was urgent about me calling him over the weekend. I just got off the phone with him and he had asked me if I could find a home for 70 branches of FNMS and that FNMS was shut down by the OCC Friday."

FNMS can hardly be faulted for trying to keep its branches/employees informed of developments, even if they did have to backtrack. Over the past few weeks, we have reported on the on-and-off again closing of FNMS in our newsletters (membership required). This was sent out on 2008-01-29 by FNMS:

"Early last week, a company wide communication was sent to all employees. It notified you of a February 16th, 2008 origination deadline as well as a closing date of March 31st, 2008 for FNMS.

At this time, First National Mortgage Sources, LLC will continue to originate loans and remain fully functioning. There is no final date to lock and close loans. It is the intent and hope of the FNMS Management Team to continue operations."

One of our sources says "They were probably the biggest federally chartered branch operation in the nation."

FNMS sent an email to all of its 200 branch Managers that it will cease operations in early March. Sent out January 18th we believe, with the headline: This message is being sent to all Branch Managers, Area Managers, Regional Managers & Corporate Employees:

"Effective March 31, 2008, FNMS will cease all mortgage loan operations. Deteriorating mortgage and credit market conditions have resulted in a sharp increase in foreclosures and a deflated housing market value. FNMS is not immune to these conditions and it has adversely affected our operations.

These same market conditions have created a very uncertain regulatory environment that has adversely affected both bankers and brokers. As a result, FNMS's relationship as a subsidiary of First National Bank required recent changes that rendered the management relationship with and capitalization by our parent unworkable. FNMS is currently unable to engage in the strategic initiatives that are required to grow and remain competitive in the marketplace."

The email went on to state problems setting up for FHA, deep regrets... termination dates, etc. etc. Then another email went out on 2008-01-23, apparently to Branches/Brokers:

"Effective March 31, 2008, FNMS will cease all mortgage loan operations. Deteriorating mortgage and credit market conditions have resulted in a sharp increase in foreclosures and a deflated housing market value. FNMS is not immune to these conditions and it has adversely affected our operations.

-- No FNMS loans may be originated after 2/16/2008 and must be closed no later than 3/22/2008. This applies to remaining active employees only. Some employees will be terminated prior to 3/22/2008.

-- Certain key branch personnel that are necessary during this wind down period will be supported. Remaining key branch personnel employment will be terminated no later than 3/22/2008.

-- Essential corporate employees will be retained through the wind down period."

Contact us if you can provide additional details on this company.

*For purposes of clarification, the OCC's consumer web site states "Operating subsidiaries are companies owned or controlled by a national bank. These companies offer banking services such as loans and mortgages. They are also regulated by the OCC." A call to OCC confirmed that omission from this list for a national bank subsidiary is a de facto lack of approval to operate, although there may be a lag of 24-72 hours in updating. No enforcement action is reported for any of the entities in this report as of 2008-02-25.