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1st Metropolitan Mortgage - Net Branch Operation



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Update - 2009-05-06: In a memo to 1st Metropolitan employees on 2009-05-05, President Daniel H. Jacobs announced the company was being "folded in" with Mirad Financial Group in a deal with Hestia Financial of Dallas, TX to become a mortgage banker:

"Hestia Financial is a boutique investment firm out of Dallas, TX headed up by Patrick McGeeney as Chariman, President and CEO. Bob Currier is Hestia's CFO. Hestia recently acquired Mirad Financial Group, a nearly dormant California-based FHA Full Eagle lender primarily to acquire the FHA Full Eagle status as well as warehouse line relationships. Through Hestia's new Mirad subsidiary 1MM is being folded in."

The memo goes on to state that the 1st Metropolitan Mortgage would be changing its name in several months "to launch a new brand to really separate our identity from a pure broker and establish ourselves as bankers." Employees will be given additional details in a conference call scheduled for 1 PM EST on Friday, 2009-05-08.

Update - 2009-04-06: It's been just over four months now since 1st Metropolitan Mortgage shut down a large number of its net branches. We're beginning to hear those branches were still owed monies that have not been paid. One former branch manager writes:

"I was told that there was no funds left to pay branches that were let go. They are using every excuse possible to extend the pay out date that has come and gone! March 15th 2009."

And one poster on our Discussion Forums had this to contribute:

"I am beginning to think 1st Met is going under. First they claim that someone stole some money from its corporate bank accounts and they were not cutting payroll checks. Now they are taking their own sweet time in returning branch managers money to them from their reserve accounts. Initially they said the funds would be returned on 3/15/2009 now they are saying it will be 3/31/2009."

Another ex-1st Metropolitan branch manager sent us this:

"All I know is that they bumped the pay out from March 15th to March 30, then to something that's TBD. They [owe] me nearly ...

I've gotten a bunch of excuses, they say they are waiting on UPS bills. Our UPS accounts were cut off in January so I am sure they have gotten final bills! Sounds like a good reason to hold back [deleted] when my branch was only required to have 2k in reserves.

I was told there is a letter coming via UPS outlining all of this. I haven't received any money from 1st Met this year..."

To-date, the former managers we've spoken with indicate there has been no money, correspondence or other communication forthcoming from the corporate office in Charlotte, NC.

The lawsuit filed by Flagstar Bank, FSB in August of last year was resolved when a judgment for $1,004,277.10 was entered against Empire Equity Group dba 1st Metropolitan Mortgage on 2009-01-30. Public records indicate the judgment was satisfied on 2009-03-02. Two subsequent (but unrelated) lawsuits were filed on 2009-03-12 and 2009-03-13 and are now pending against Empire Equity Group. Both contain allegations of fraud, misrepresentation and other violations. The earlier of the two cases was filed by an individual who was offered employment with Empire Equity Group and worked there for a short time following the alleged illegal acts. The latter relates to a contested foreclosure in CA.

We have yet to see any legal actions on behalf of the former branches or their employees, but one has to wonder what could be in the works considering what could be a substantial amount of money held in limbo.

Original Posting - 2008-12-31: Tips have been coming in that Charlotte, NC based Empire Equity Group, which operates under the dba 1st Metropolitan Mortgage, has announced it will immediately close "up to 80% of its offices" and discontinue originations from those locations. A memo giving just one day's notice was sent out late afternoon on December 30, 2008 to affected branches... from the memo:

"While we certainly appreciate and value our relationship, the economics of supporting your branch can no longer be justified and we are closing the branch location you manage effective January 1, 2009."

1st Metropolitan Mortgage was listed as the #2 Top Broker for 2007 in the June 2008 issue of Broker Magazine, with originations of $2.4 billion. Several persons we spoke with indicated they were under the understanding that the company was becoming a correspondent lender with an unknown bank, and certain offices were being closed due to small size and/or low volume. From one email we received:

"They did not receive an email but each received a phone call notifying them that 1st Met is requiring them to close at least $3 million per month to maintain a branch under 1st Mets new infrastructure that includes their now aligning with a federally charted bank.

Some offices they are just closing while others they are trying to match up with local offices to combine production to equal at least $3 million per month. One BM said someone in 1st Mets licensing dept told him they are set to close 120 branch offices."

One source we spoke with believed they were shutting down and may file bankruptcy, saying "they expensed it into the ground." If expenses are a factor, ongoing litigation is undoubtedly adding to the bill.

On 2008-03-27 Flagstar Bank filed a lawsuit against Empire Equity Group dba 1st Metropolitan Mortgage along with Chicago Title Insurance Co. for the repurchase of two loans totalling $1,086,786.60 plus costs on the grounds that they "contained false and erroneous statements and information, and constituted fraudulent transactions." The loans were originated by then-Empire Equity Group Branch Manager Joseph Kohen to one Pearl Dwek. If the names "Kohen" and "Dwek" sound familiar, it's because they've made news before.

From a 2007-03-21 press release, the Asbury Park Press reported Joseph Kohen plead guilty to bank fraud "saying he helped Dwek defraud PNC Bank of more than $20 million." Real estate mogul Solomon Dwek was also charged. In their series coverage of the ongoing story, Asbury Park Press asks "Was Wife A Straw Buyer?" Flagstar Bank alleges just that, citing in one instance that "the property was never actually transferred from its owner to Dwek," and in the other that "Dwek had simultaneously taken another mortgage loan from another mortgage lender." In both instances, Flagstar stated "it did not have a valid first mortgage lien on the property." In a 2008-11-19 filing, Flagstar requested the Court to compel discovery and "(1) enter a default judgment against Empire; (2) prohibit Empire from opposing Flagstar's claims and from supporting its affirmative defenses; (3) prohibit Empire from introducing any such withheld material in evidence; (4) find Empire to be in contempt of Court; and/or (5) award Flagstar its costs and attorney fees." Empire Equity Group subsequently filed in protest on 2008-12-02. The matter is still pending.

Additional details are still forthcoming. Contact us if you can contribute, or post your comments below.

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mortgagepro2008 at 16:25 2009-01-02 said:
They just posted the Vegas odds....the over/under on this company going out of business is 4-1-2009. If anyone is buying the whole, "we are going to be a federally chartered bank, but we don't know who with yet" you are not seeing the whole picture or are under a rock. Look at how many companies on this list that WANTED to be a Bank, but I have news for these people it is not that easy anymore. Furthermore, if there is any pending litigation that is almost a guarantee that you are not going to become a chartered bank or for that matter any type of bank.

I hate to see anyone lose their job and I am sure there are a lot of good people at 1st Met, but honestly they are not going to make it. The days of wholesale brokered business coupled with net branch facilities that don't at least have 1 correspondent line are numbered.

Get out while you can, becuase the end is near. Permalink

Scott D at 15:26 2009-01-03 said:
I’ll take those Vegas odds betting on 1st Metro’s management team.

I’ve been with 1st Metropolitan Mortgage for more than six years.

I received the termination e-mail along with over a hundred others impacting probably several hundred employees. There was no easy way to do what 1st Metro must do.

The 1st Metro Corp Office is well run, staffed with intelligent proven “high integrity” high ethics individuals with long seasoned mortgage experience. This management group does not have a dishonest bone in their bodies. This is what will enable them to prevail.

It’s the 80/20 rules of thumb. 80% of the production typically is performed by 20% of the whole.
1st Metro was immune to the correspondent lending related loan buy-back catastrophes that plagued so many companies in the news of the last two years because of a strict no correspondent lending policy. That was part of the basis of our business model.

I believe that mortgage fraud of all categories eclipsed the workability of this finely tuned mathematical model that has the same expensive buy-back penalties. I also believe that the new aggressive state legislative compliance audit expenses grew much larger and out of control because of the National Economic meltdown and media driven hyperbole. Probably reasonable but very difficult to plan for and predict.

The lawsuit you’ve posted is chump change. It would not be unreasonable for there to be more of that yet unknown as of this date, all negotiable and all workable, especially with $150,000,000 per month in lower cost higher profit margin future originations.

The business model we all agreed with and signed onto just simply does not work anymore.
This future business model change is a Harvard Business School taught method to expand and grow a future company that is agile, less expensive, more profitable and easier to manage and/or to purge non performing assets to identify and isolate maximum shareholder value for sale/or for merger with a highest bidder which in this case so far is an unidentified national bank. Not identified at this point for legal and strategic good business reason.

I’d bet a dozen bidders were pining for this opportunity. 1st Metro’s CEO has a proven uncanny knack for these type transactions.

You can be guaranteed the residual 1st Metro after this purge will be an ALL STAR staffed heavyweight contender. Direct Lending has huge national expansion more cohesive compliance benefits as long as underwriting guidelines are strictly adhered to and with solid qualified loan applicants. This management group will achieve that.

I’ll take your bet 1st Metro will not only survive but also thrive after April 1st.

Scott D. Permalink

zonnt at 18:10 2009-01-03 said:
I could feel the storm about a month ago and moved over to a modern day nationwide net branch system not knowing what 1st Met was about to become.

As typical companies continue to sell them selves out, 1st Met was classless in the way they handled their down sizing or what ever you want to call it.

I was smart "lucky" enough to move on and forward with a new company in advance but by providing no support to their existing branches clearly shows their destiny is not not going to be a bright one.

The least they could have done for their hardworking loan officers and branches in one of the worst financial years was to give them some kind of heads up and provide sources for applying with other net branch opportunities.

In a year when pretty much our whole financial market had collapsed the last thing you would expect is your own company to do the same to its own employees. That is classless!!! And behind every classless business decision are classless people.

Instead a cold letter with a built in lie stating these branches are not producing was delivered via email on Dec 30th. Think about it, an email was delivered and then the entire company went in hiding. (Class Act)

Why not tell the truth? Why did they not send a letter explaining that they are merging as a banking type institution and will be downsizing?

I'm sorry but my money is only on honest and trustworthy companies.

Good luck!!

Rick Gomez Permalink

Scott D at 20:45 2009-01-03 said:
Since when does class have anything to do with business. It's nice when it's there but situations like this don't leave a lot of room for pleasantries.

You seem to have escaped any of the anxiety, anguish and unexpected stress befallen your ex-coworkers Mr Gomez because of your foresight and intelligence. You were sure smarter than the rest of us. I mean that sincerely.

I don't know you, your background or your level of business expertise.

I've read this Corp Offioce e-mail several times and I'm unable to identify any lies or untruths whatsoever.

It's just business buddy. The ones that got cut were'nt producing enough of it and that includes myself.

So let's say we were all given a 30 day notice. Right at the beginiing of a mini-refi boom. Just think of how many loans we would have lost in panic transition to a new set-up, just think of how much money 1st Metro would've lost at the same time. Sounds like a lose lose situation to me. This might have been "classy" to you or some folks but it sure doesn't sound like anything I would've liked to hear at anytime much less three weeks before Christmas.

The employment agreement I signed did not specify that I could expect anything like a pre-warning advance notice before any cataclysmic event especially my own branch office termination.

The reality is that a few bad apples that wrote fraudelent loans that 1st Metro had to buy back and these events also triggered massive State Compliance Audits simultaneously. This is what precitptated this as well as a difficult mortgage industry year that literally has changed the mortgage lending landscape for everyone. This type of thing can cascade overnight.

Lets face the facts anybody worth their salt in this industry will have new employment before the end of next week. We're being afforded a class opportunity to close out our in process loan pipelines in plenty of reasonable time. The Companies future plans most assuredly guarantee that we will be compensated what we are owed in full. I imagine a whole lot of branches will be owing them monies that they'll never see.

I wish you a lot of luck and future prosperity with your Modern Day Net Branch Company Mr Gomez. That's pretty funny by the way. Modern Day does not exist in this economy. Maybe after it's fully recovered. Permalink

NCMortgageFella at 18:02 2009-01-04 said:
I was approved three months ago but just setup with 1MM Christmas week. The delay was due to family medical issue. I ordered a sign, business cards, and trifolds. I was dropped for lack of production. I received an email Friday evening from corporate instructing me that I could sign up with another branch and providing a form to do so but I have no idea what the entails or how to go about it since I only know two other people with branches. They are not sure of their status either.

I am just looking for some guidance. Due to the family issue written about above I have been out of the mortgage loop for 18 months after a very strong ten year career as an LO. I was wanting to get back full speed and owning my own office I thought this was the ticket. I do not want to employ people right away as I need to get my feet under me first.

I wish nothing but the best to 1MM. I like the people there but I do seem to get the impression that they are not really sure of what is going on and do not have a solid plan in place. Hope it works and maybe I will be along for the ride... Permalink

Brita at 19:47 2009-01-04 said:
A former loan officer, as of 12/31 from 1st Met, I will have to agree with mortgagepro2008

Something just isn't right. We can go ahead and make up excuses to defend this situation, but more than likely I think it will be a hopeless cause

After the past couple of years, being the absolute worst in the industry, with a refi boom here, now 1st Met is closing 80% of the stores that they say aren't profitable???

Before all this happened, in my state of Illinois, there are "ruffly" 36 1st Met branches licensed currently and shows out of these licensed only a 1/3 are still ACTIVE

What about the branches to where a good loan is only $80,000? To make up for $3M a month that branch would have to close about 38 loans a month. Didn't 1st Met realize this when they approved the branch?? I don't think so.

It sounds like they were looking for quantity and not quality

I have loans that are piled high that I am taking to my new company and good luck to all lo's that are still at 1st Met, you might need it!!! Permalink

Scott D at 06:16 2009-01-05 said:
Everybody will have a good argument and reasonable rebuttal to this situation. Nobody likes rejection and Anger is always the first impulse emotion.

This 1st Metro “informal” Re-Organization required the Corp Office to virtually stop on a dime to move in another direction.

The majority 300 some odd brokers/lender companies on this “implosion” web site list demise were caused by inability to liquidate loan buy-back provisions from loan servicing defaults. This is not a factor for 1st Metro and any Ex-Branch Manager or seasoned Ex-employee should know this. That does not make this any easier for those affected but in an analysis sense this situation is much different than the majority of companies on this web site.

I've been advised from a solid source that the single/sole and only Lawsuit listed on this web site has had a large cash settlement already paid on it by one of the defendents. Further evidenced by the fact that this plaintiff Lender is still working with 1st Metro and as one of their preferred choices. It is reasonable to suggest that alternative personnel placement strategies were composed, developed and proffered “after” the termination announcement. This makes it appear that there was not a plan. Trust me there is a definite planning direction. This management team consists of deep thinkers.

We will never know the “internal data” that precipitated this decision by the Corp Office but to know this Management Team makes one easily surmise that they all are anguished and grieving this necessary asset/liability disposition.

January 1st, 2009 Mortgage Industry reality is that we all are in a National Declining Market for collateral values and facing the first Federally mandated Appraisal Statute processing requirement that “removes the originator completely” will make the refinance climate even more difficult and all new loan processes lengthier.

NCMortgageFella: Your situation is unique and deserves extra consideration. Corp Office will strive to accommodate you the best that they can I’m sure of it. Be persistent. By the way none of us ever owned our own office that is very clear if you read your employment agreement carefully.

Brita: There is no doubt that you are looking at multiple employment offers before the end of this week. Trashing your ex-employer will not endear you to any new one. Just tell them you were ‘laid-off” and that should be enough. In a rate/term only refinance market with declining value your $80,000 average loan pipeline is not worth what it might have been just a couple of years ago. FHA streamlines would be the only exception but you can expect that that niche will be changing dramatically within the next 3 months. (Requiring higher Scores with much lower LTV’s) You’re going to end up killing yourself to close those loans and the net profit won’t be like you experienced in the past. Please don’t be mad just take heed.

The nature of our Branch Manager relationship with 1st Metro was that of traditional employment with major entrepreneurship allowances, factors and qualities. Branches producing less than 10 loans per month were previously profitable, with minimal risk and represented the large majority of any Net Branch type operation. With all of the national economic turmoil, individual states with massive new legislative banking initiatives, constricting underwriting guidelines twice or more monthly and mortgage fraud of all types has dictated the new climate that we are all in. It’s just business people.

My intent with these posts is to analyze and identify what we are all facing as industry professionals. I am defending the Corp Office because I know these people personally and I believe that under the current circumstances and the projected future industry environment that they had no other choice but this decision. Criticizing their chosen methodology is fair and reasonable but unless you are sitting in that decision chair yourselves you’ll just never know all the thought processes considered. Permalink

NCMortgageFella at 08:07 2009-01-05 said:
Scott my wording of "own my own" branch is obviously not the correct terminology but I think the context is explanatory and yes I understand the ownership (or lack of) with 1MM.

I think 1MM management has been aggressive in doing things the right away as far as compliance and fraud. Even with perfection in that area any company is still going to have defaults. Just the way it is right now. Permalink

Scott D at 08:20 2009-01-05 said:

You are absolutely right about that.

Our industry is more imperfect now than ever before. There is no perfect way for anything like this to be done by any company.

I don't know you but I'm willing to help you. Contact me privately if you feel that I could be of assistance to you. Sometimes just having a equally affected peer to communciate with helps.

You may not know but 1st Metro has a "Best in Class" Support Department. There ability to assist will be improved as this thing ages a little.

Good luck buddy it'll all work out for the best. Permalink

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