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Residential Loan Centers of America - Agency, FHA/VA, Reverse, Commercial

2009-02-16

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stories: chicagotribune.com

Update - 2009-02-18: Multiple sources including the Chicago Tribune have reported that the loss of a line-of-credit with Bank of America (formerly through Countrywide) was the likely cause of Residential Loan Centers of America's closure. We're told they also had relationships with J.P. Morgan Chase, Wells Fargo, and CitiMortgage. One tipster wrote:

"They probably had loan buybacks. If a banker like RLCA gets cutoff through warehouse, they still got broker channels to go through. Why shut down?"

Public records do not indicate any action pending to enforce loan repurchases. But as pointed out in the forum discussion associated with this listing, HUD's Neighborhood Watch reflects a significantly high rate of loans in default or claim. A ratio in excess of 200% of the national rate can constitute revocation of approval to originate FHA loans, and Residential Loan Centers of America had a compare ratio of 320% for the two-year period ending 2009-01-31. Warehouse lenders and correspondent investors also take this data into consideration when doing business with their retail lender clients.

Original Listing - 2009-02-16: We've been told by a number of sources that employees at Residential Loan Centers of America, Inc. were notified in an email sent out last night by President Matthew Rudnick that the company ceased doing business "effective immediately."

"It is my sad duty to inform you that due to unforeseen business circumstances, including the failure of our current warehouse lender to renew our existing warehouse facility leaving us without the necessary capital to fund future loans, Residential Loan Centers of America will be closing down all operations, which will result in the complete elimination of all employees at all facilities. Consistent with these plans, we are terminating the entire workforce, effective immediately."

The web site has been taken offline (view archived), and email has reportedly been "locked out." One tipster told us, "They all went to the office today and then waited for fedex in order to pick up their last checks."

Residential Loan Centers of America was headquartered in Des Plaines, IL with seven additional offices in IL, OH, TN and WI per CityTownInfo and the site's archive. Volume in 2007 averaged over $41 million per month. The company was ranked number 448 on the INC 5000 in 2004, but had fallen to 4,665 by 2008 according to the profile on INC's web site. That profile listed 215 employees. A job listing from May of 2008 indicated the company was licensed to do business in 18 states.

The reason for the closure was not given. If you can shed some light on the "why," please don't hesitate to contact us. Your comments are welcome below.


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Comments:

rgrosse at 16:49 2009-02-16 said:
Just interviewed one of their LO's in Illinois, and he received a call this past weekend from the owner stating that their warehouse line of credit had been pulled, and they are forced to file BK. Permalink
NOKIDDING327 at 22:50 2009-02-16 said:
I JUST LOOKED UP THEIR FHA DEFAULT RATIO;

MAYBE A 320% RATIO IS A GOOD REASON TO LOSE YOUR WAREHOUSE LINES. DAH! Permalink

reflection14 at 01:03 2009-02-17 said:
Where did you find that 320% statistic? Does not seem feasible the company would have been able to maintain their DE Underwriters if that were the case.

I also think it's deplorable that former employees would bash a company that actually gave them a lot. Great character people. I hope you stay out of the service industry. Permalink

NOKIDDING327 at 06:08 2009-02-17 said:
Response to reflection14:

I went to HUD.gov and then to LENDERS and then to Neighborhood watch:

here is what is there:

Single Lender - Originator by Institution RESIDENTIAL LOAN CENTERS OF AMERICA - 13686 Lender Originations in the United States Default Choice - Current Defaults Performance Period - 01/31/2009 Sort Order by Percent of Defaults and Claims in Descending Order Data shown includes all insured single family loans with beginning amortization date between February 01, 2007 and January 31, 2009 Rank United States Compare Ratio Total Orig. Total in Default Total Claims Total in Default and Claim % in Default and Claim United States Total Orig United States Total in Default United States Total Claims United States Total in Default and Claim United States % in Default and Claim 1 United States 320% 3,775 529 21 550 14.57 1,891,505 81,715 4,427 86,142 4.55

My problem is that HUD says that ratios over 200% should be closed. For some reason they let them sit there for months and do the federal review for months and months over 300%

It is telling that 90% of the ones closing down have a ratio over 300%, and they all wonder : oh me, WHY? it comes down to they should have been shut down for the kind of business they do, MONTHS AGO Permalink

Robin at 12:33 2009-02-17 said:
Here's the info from HUD's Neighborhood Watch in a more readable format:

http://ml-implode.com/info/rlca-nw.jpg

(If the graphic does not display properly and you are viewing the "Comments" posted on the Listing page, click the "go to forum thread" link) Permalink

devestated123 at 18:25 2009-02-19 said:
Let me first of all say that anytime a company closes in such a manner that there are a lot of lives that are being affected. I am one of those people. The worst part about it is that we all recieved our checks via direct deposit, only to have them taken back today and now have negative accounts because of it. If anyone has ever been in this position any advice would be greatly appreciated.

As far as the default rate is concerned, please be aware that there were several branches that made up RLCA Inc. Including one in WI and several in other numerous locations. Each branch had their own default level. So were there a some LO's that put customers into loans they couldnt handle which resulted in default, sure. I am willing to bet that every single mortgage company out there has an LO or two who has done the same thing. Does one or two bad apples spoil the whole bunch, absolutely! But it doesnt change the fact that now we are all sitting here with negative accounts and scrambling to find jobs. Sad, just very sad. Permalink

NOKIDDING327 at 22:51 2009-02-19 said:
Sure there are bad apples in every company; this is not about the Loan Officers, it is about the Company who underwrites and approves the loans. Permalink
neums75 at 15:11 2009-02-21 said:
Yes what happend to RLCA is very unfortunate. Instead of bashing the owners, the company, blaming the FHA default rate etc, step back and think for a minute what are the 4 owners going through? They had spent 11 years of there life building up a company and then watching it fall. I really truly don't think they are intending to screw anyone. I have been through this several times with companies closing just like this one and unfortunley most of the time you do not get paid, but I truly feel that it was never there intention to do so. How can some of you ex-employess bash the owners over company email? Just remember they did ALOT for us in many ways. I am sure many of you would agree with me.

Yes, RLCA did have a high FHA default ratio, however they still had to follow the guidelines of Countrywide so they would be able to sell the loan back to them, so therefore you cannot blame the uw's. All of there underwriters had many years of FHA expirence behind them.

We are in a recession, hundredes of people are losing there jobs everyday so how can they make there mortgage payment if they are out of work. RLCA was a big FHA mortgage banker so the risk of default would be greater than you typical Mom and Pap shop.

Take this as a learning experience and hopefully this will not happen to any of us again. Permalink

devestated123 at 20:43 2009-02-22 said:
I would like to make a comment on the comment made by user "nokidding327". Where would the UW's be without LO's? If it were not for the LO's there would be no loans to underwrite. So when you say this is not about the LO's and its about the UW's I dont think that is correct statement. This is about every single person who individually and as a whole made up the company, originated loans, processed them and underwrote them. Again as the poster above stated think about the owners. Do you really think that it was their intention to close down all operations and leave all of us without jobs? I assure you not. Do I think that things could have been handled differently? Most definetely. Being fired via email is not something that I have ever experienced in my life and dont wish to ever have that happen again. My only question at this point is did they see this coming and not say anything until the last possible moment. I think that is the hardest thing that we are wrestling with here. I find it very hard to believe that they knew nothing until that Sunday evening. I gave this company my all and I guess I just expected a little respect in return. I didnt get that, and that my friends is what I am struggling with. As big of a company as RLCA was they always gave the "family" feel to all of their employees and this just isnt the way that it should have been handled. I can deal with companies closing for reasons such as this, that is a big thing to lose your line of credit. But just give back the same respect to all of your employees who helped make the company what they were and go about it in a different manner. There are lots of you that will sit here and bash the company and point fingers and state things such as we should have lost our FHA license a long time ago, but just remember this one thing, all of us in the mortgage industry dont have any sort of job security at this moment and each and every one of you could be sitting in the very same boat that myself and numerous other people are sitting in. So be a little kinder in what you say cause it could happen to you. None of us are immune to this in the market we are experiencing right now. Be careful what you say, because Karma can bite you when you least expect it. 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.