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Guaranty Bank - GB Mortgage - Wholesale

2009-05-01

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stories: bizjournals.com

Update - 2009-05-06: The Business Journal of Milwaukee has reported 62 employees in Wisconsin will be affected by the shutdown of GB Mortgage along with another 69 employees in thirteen other states, and a select few employees of parent Guaranty Bank. Three WI office locations will be closed.

Original Listing - 2009-05-01: Milwaukee, WI based Guaranty Bank's GB Mortgage has announced its exit from wholesale lending effective immediately as of 2009-04-30 citing "the challenges of today's market." You can read the bulletin issued to brokers here.

Tipsters told us employees were notified about the shutdown in a conference call yesterday. We'd reported previously in a member newsletter on 2009-02-27 about drastic cutbacks in wholesale:

"It appears most if not all AE's in western states were let go, and GB Mortgage continues to experience issues with funding capacity. One former AE's email indicates "issues ... for the last three months were fundings being stopped on the 15th due to warehouse capacity issues and the new $250 fee to lock or submit a loan (only refundable if loan funds). You can understand how big of a problem the funding issue is when a majority ... is FHA streamlines."

This comes on the heels of a Cease & Desist issued to parent Guaranty Bank, FSB on 2009-03-11 by the OTS requiring higher capital levels and tightened risk control. According to one poster on our forums, the headcount for AE's had been previously reduced by half two times in as many months, dropping from 80 to 40.

Details are still coming in and we are unsure of the number of employees affected. Please email us if you have more details. There is a discussion about GB Mortgage on our forums here or you can also comment below.


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Comments:

Since1993 at 11:31 2009-05-01 said:
You have confused the two Guaranty Banks.

The Cease and Desist order was issued for the Guaranty Bank whose parent company is Guaranty Financial Group Inc. out of Texas.

The exit of wholesale was GB Mortgage based out of Wisconsin. Please see their website www.gbmortgagelending.com where the memo is posted. When you scroll to the bottom and review the "About Us" information, it explains that their parent company is Guaranty BAnk, FSB or Milwaukee Wisconsin.

I worked with both companies when they were both in wholesale. GB Mortgage when it was GB Home Equity on the 2nd mortgage side and Guaranty Bank until last summer when they quit working with brokers. Permalink

kfrant at 12:50 2009-05-01 said:
This is what has been happening at Guaranty Bank in Brown Deer (Milwaukee), WI:

Link: http://www.jsonline.com/business/42239707.html

Guaranty Bank faces dire court fight By Paul Gores of the Journal Sentinel

Posted: Mar. 31, 2009

Guaranty Bank, which has been losing money and is under pressure by regulators to strengthen its financial position, says in a federal court filing that the bank will go out of business unless a judge lets it halt premium payments to an insurance company.

In court documents connected to a lawsuit against the insurer, Guaranty said it needs an injunction that will immediately stop the premium payments of at least $3 million a month - but still keep the policy active - or it will not be able to abide by regulators' orders to beef up capital and won't survive long enough to resolve the suit.

Guaranty, in a brief that asks the court to keep coverage intact but relieve the bank of its obligation to pay premiums to Evanston Insurance Co., of Deerfield, Ill., states bluntly: "This is a 'bet the bank' motion because the continued existence of Guaranty Bank rests on the outcome."

Guaranty's lawsuit, which also seeks the return of $30 million in premiums paid since 2004, appears to hinge largely on how the court interprets Wisconsin insurance law.

Brown Deer-based Guaranty contends Evanston Insurance sold mortgage guarantee coverage to the bank for its home-equity loan portfolio illegally because the insurer wasn't licensed to sell that type of insurance in Wisconsin.

The bank argues that under state law, the alleged violation not only entitles Guaranty to relief from further premiums, but to continued coverage on the insured loans as well.

Evanston Insurance asserts that the policy isn't mortgage guarantee insurance - rather, it's credit insurance sold on a legal "surplus lines" basis - so there is no violation.

The insurer also contends that Guaranty, by having a business relationship with Evanston for nearly five years, chose to maintain the policy.

During that period, Evanston says in court documents, the bank received in excess of $22 million in claims.

Evanston spokesman Robert W. Blazer III said in a written statement Tuesday, "Guaranty's request for unlimited coverage without having to pay premiums is not what the parties agreed upon. The insurance product sold to Guaranty Bank is legal, and we will prove this based on the facts and the law."

The lawsuit also names Universal Assurors Agency Inc., of Omaha, an agency Guaranty says worked with Evanston on the policy. Like Evanston, Assurors contends the policy is legal under Wisconsin law.

Guaranty Bank said Tuesday it had no comment on the lawsuit and injunction motion.

Financial consequences A court brief explaining the bank's motion for a preliminary injunction paints a dire picture of what will happen to Guaranty if U.S. District Judge J.P. Stadtmueller doesn't grant the request.

It says the bank is required by regulators to have a mortgage guarantee insurance policy in place to back its $634 million portfolio of home equity loans.

"So if Evanston were to cancel the insurance policy, the bank would face serious regulatory implications, including possible intervention by the FDIC, liquidation or involuntary merger," the bank says in the brief. "Making matters worse, given the current financial crisis, the bank has no other reasonable markets to turn to for this mortgage guaranty coverage."

A stern warning Documents filed by Guaranty say Evanston keeps raising the premiums on the coverage, which is a huge drag on capital at a time when the bank is under orders from regulators to improve its capital levels.

An affidavit by one bank executive estimated Guaranty's capital would deteriorate and fall below levels generally acceptable to regulators by the end of June if the bank continues to pay the premiums.

Three weeks ago, the Office of Thrift Supervision issued a cease-and-desist order to Guaranty, demanding that it improve its capital ratios, reduce its levels of delinquent loans and make sure it has adequate reserves for bad debt.

The order, which bank analysts consider a serious action by a regulator, came in the wake of 10 consecutive quarters of losses by the bank.

Guaranty, which is primarily a mortgage lender, has assets of $1.6 billion.

It made home equity loans during the housing boom, but when the market collapsed and the economy deteriorated, it was left with many loans that customers have been unable to repay.

Evanston's Blazer said the firm is continuing to pay "all legitimate claims," and has paid more than $22 million to the bank over the last five years.

"It appears that Guaranty Bank, like other financial institutions, is suffering through a difficult time in the current economic environment," Blazer said. Permalink

blahblahblahh at 15:32 2009-05-01 said:
Guaranty Bank out of Milwaukee WI, is the parent company of Shelter Mortgage (retail lending) and GB Lending (formerly GN Mortgage). GB Lending pulled out of the wholesale market, Shelter Mortgage will continue. Have been in contact with a rep who said they were notified by conference call, and that all loans in the pipe must be cleared by May 8th. She said it was not a surprise as this has been coming for a long time - lot's of issues with waehouse funds (lack of) and fundings were basically cut off every month on the 15th .... Permalink
mtggirlne at 10:28 2009-05-04 said:
The cease and desist you link to on the GB implode is for a different company Permalink
kfrant at 13:53 2009-09-15 said:
Rumor on the street is Brian Levy, Sr. VP, resigned yesterday. What do you think he knows? Permalink
Viola32 at 02:18 2012-02-01 said:
I worked with both companies when they were both in wholesale. GB Mortgage when it was GB Home Equity on the 2nd mortgage side and Guaranty Bank until last summer when they quit working with brokers. 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.