Local mortgage company closes
Hundreds lose their home loans after the abrupt move.
By Andrew LePage -- Bee Staff Writer
Published 2:15 a.m. PDT Saturday, August 16, 2003
Sacramento-based Capitol Commerce Mortgage Co. closed abruptly Friday without fulfilling loan commitments, forcing hundreds of consumers around the country to scramble for new loans to refinance or buy homes.
Many borrowers face higher interest rates today that will add hundreds of dollars to monthly payments. And some risk losing deals if they can't qualify at higher rates or sellers won't wait while they secure a new loan.
Executives at Capitol Commerce, a major local mortgage banker that ranked among the top 15 statewide, didn't return phone calls. Fair Oaks resident Chris Sordi, 58, is listed as the company's principal on state incorporation records.
In a statement sent to business associates and forwarded to The Bee, the company said it had "ceased conducting new business." The company, believed to employ hundreds in eight states, said it would continue to operate on a limited basis to wind down its affairs.
Granite Bay resident Dean Haught was set Friday evening to move into a home he and his wife were buying in Camino.
"My broker told me I've got some terrible news: 'The mortgage company covering your loan ... has closed their doors,' " Haught said. "It's a nightmare."
Haught said he expected their loan to be funded earlier Friday, but the deal was on hold as his broker shopped for a new mortgage, sure to entail a higher interest rate.
Brokers across California and elsewhere in the nation reported similar problems.
"I've got to go back to my clients who have home purchases and cash-out refinancings and tell them the rate we locked them at I can't get anywhere close to now," said Rollin Meyer, owner of The Meyer Group, a Sacramento-based mortgage broker.
In extreme cases, brokers said, borrowers who'd locked in rates of 5 to 5.25 percent in June face rates of 6.5 percent or more, given the spike in rates over the past seven weeks.
"This is not only a disaster for Capitol Commerce but for other brokerage firms like mine that have been sending basically 90 percent of our business to Capitol Commerce; this just kills us," said David Maningding, owner of Acclaimed Financial Group, a brokerage in Charleston, S.C.
The closure came weeks after Capitol Commerce celebrated one of the busiest months in its 17-year history. The lender funded $3.7 billion in mortgages during July, according to several account executives interviewed by the Associated Press on Friday.
"It's really sad to have to deliver bad news like this," Capitol Commerce account executive Steve Genakos told AP as he prepared to tell another customer about the firm's collapse. "This is one of the hardest things I have done."
Capitol Commerce employees approached locally Friday would not comment on the company's situation. One employee said he couldn't speak because he feared he would not collect his last paycheck for three weeks' work.
The retail office inside the Sacramento headquarters sat dim Friday afternoon with stacked boxes and empty desks. People could be seen inside the administration office, but the door was locked, and no receptionist buzzed in visitors.
In the Folsom office, behind unlocked doors, about a dozen people hurriedly sifted through files. Rich Stephens of West Coast Financial Services walked out of the Folsom office carrying a mail crate full of files -- loan documents for his companies' clients.
He spent three hours pulling files alongside representatives of other mortgage companies and employees of Capitol Commerce. They told him "their doors were being closed and they were out of business," he said.
Many of the borrowers affected by Capitol Commerce's collapse might not be aware the firm handled their applications.
That's because it primarily acted as a wholesale lender that sold loans in the secondary market after funding them. The lender appealed to mortgage brokers by offering some of the lowest available interest rates, employees and brokers said.
"Every day their rates were consistently better than everyone else's, particularly the larger banks and mortgage companies," broker Maningding said.
It was unclear what went wrong. The aggressive pricing could have landed the lender in trouble if Capitol Commerce's management didn't sufficiently offset -- or hedge against -- the risk that rates would rise.
"That's the kind of difference that can set you on your ear real quick," said Keith Gumbinger, vice president of HSH Associates, a rate-tracking firm based in Butler, N.J. "I'm surprised we haven't seen more failures like this. It might not be the last."
Getting the money to fund a basket of loans at low rates available weeks ago would be difficult now because low-rate loans diminish in value when rates rise, Gumbinger said.
Capitol Commerce had its headquarters on American River Drive off Watt Avenue and branches in Folsom and Woodland. There were 15 regional offices in California, Oregon, Washington, Arizona, Colorado, Texas, Illinois and Florida.
The lender began making loans in 1986, according to its Web site. The lender has a clean record with the Department of Real Estate.
The company boasted of its reliability on its Web site, www.capitol-commerce.com, noting that "the market may change, but our commitment won't. Year after year, Capitol Commerce Mortgage is there for you, in good markets and bad"
By Friday evening, attempts to access the site yielded a blank screen.
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