Reply by Charm_AL on 6/5/06 10:53am
Msg #124081
Joan, if they are in Kirkland WA....
'Bottom fell out' at Merit Financial
Kirkland firm lays off all but 80 of its 410 employees
By DAN RICHMAN
P-I REPORTER
Rising mortgage rates, now at their highest point in nearly four years, helped push Kirkland's Merit Financial Inc. into a state of collapse Thursday.
Merit without warning fired all but about 80 of its 410 employees Thursday morning, also declaring its intention to seek bankruptcy protection, said Chief Executive and founder Scott Greenlaw.
"You try to prepare, you try to plan, but in the end, our sales didn't keep up with our overhead, and eventually the bottom fell out," said Greenlaw, a former University of Washington football player.
Chief Financial Officer Ryan Kidd explained that there was "an absolute retraction in our marketplace -- residential refinancings and second mortgages -- of about 40 percent. We sustained a number of months of losses. The revenue was not there to support the business, and we don't see that turning around in the near term."
Freddie Mac, the mortgage company, reported Thursday that for the week ending Thursday, rates on 30-year fixed-rate mortgages averaged 6.59 percent, up slightly from 6.58 percent last week.
This week's rate was the highest since the week ending June 20, 2002, when 30-year mortgage rates stood at 6.63 percent. It marked the sixth week in a row that rates on 30-year mortgages went up. Rates have been rising as Wall Street investors have worried about inflation picking up.
Merit, a privately held residential mortgage company, bore an additional burden in the form of its 59,000-square-foot building, for which the company paid $13.5 million in January 2004.
"It gave us a good image, a professional look, but it became a large, large overhead for us," Greenlaw said.
In an earlier indication of problems, the company laid off 18 workers in November, Greenlaw said.
Kidd said the workers let go Thursday were not given severance pay. But loan officers were allowed to take their leads with them, and the fired employees were provided with "unemployment resources," he said.
All the departed employees were paid in full, said Greenlaw, who acknowledged that those remaining on staff "are worried about getting paid." But Kidd said the fired workers might not be paid for this week's work.
Between 75 and 80 staffers will stay to help wind down the business, making sure customers in the process of closing loans or refinancing aren't abandoned, he said.
Merit was founded in July 2001 and expanded rapidly. In three years, its revenue grew more than 259 percent and its loan volume increased by more than 1,800 percent, according to the company's Web site. The Puget Sound Business Journal in October listed it as 27th among the state's 100 fastest-growing private companies
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