Mortgage Investors Corp., the St. Petersburg company that refinances mortgages for veterans, announced Monday it was laying off nearly 500 employees and would no longer write new loans.
The news brings the total number of layoffs at Mortgage Investors since the beginning of summer to more than 800.
Of the 476 employees laid off Monday, 256 worked at the company’s St. Petersburg headquarters, while the remaining 220 worked at the company’s other locations spread among 25 other states, company chairman Bill Edwards said in an interview.
Roughly 60 employees will remain in St. Petersburg to service existing loans, though that number will be whittled down to about 30 people in the months ahead, Edwards said.
Between the 476 laid off Monday and the 380 laid off from a St. Petersburg call center over the summer, Mortgage Investors Corps. is paying between $7 million and $8 million in severance packages. Employees will receive two months’ pay, benefits until the end of the year and all their accrued sick and vacation time, Edwards said.
“These people have worked for me years and years,” said Edwards, who’s also a music promoter, runs The Mahaffey Theater for the City of St. Petersburg and is redeveloping the BayWalk retail and entertainment complex downtown into The Shops at St. Pete.
“It’s probably one of the saddest things I’ve done in a very long time, to tell them they no longer have a job.”
News of the terminations is just the latest trouble for the 75-year-old company.
In June, Mortgage Investors reached a $7.5-million settlement with the Federal Trade Commission, which had accused the company of calling millions of U.S. military personnel listed on the Do Not Call Registry. A deal to sell the company to the Tampa-based HomeBancorp. fell through this year.
The company also misled consumers by suggesting they could get no-cost fixed-rate mortgages, even though it only offers adjustable rate mortgages, the FTC alleged in its complaint.
When it settled with the FTC, Mortgage Investors was preparing for a federal lawsuit claiming several banks charged hidden fees to veterans for loans backed by the U.S. Department of Veterans Affairs.
In a separate case, the Florida Department of Agriculture and Consumer Services filed a complaint against the company for 84 alleged violations of the state’s Do Not Call rule.
In 2011, the state of Minnesota issued the company a cease-and-desist order after discovering Mortgage Investors was disseminating published advertising that made it appear the company is a government agency, according to a consumer website for the Nationwide Mortgage Licensing System.
Nevertheless, business was booming, with Mortgage Investors writing roughly $125 million in mortgages a month, Edwards said. Marketing regulations detailed in the Dodd-Frank Wall Street Reform and Consumer Protection Act that go into effect Wednesday ultimately pushed him out of the mortgage business, Edwards said,
Under the new rules, federal regulators will be requiring potential customers to give written permission to mortgage companies before they can receive telemarketing calls. In other scenarios, a company is prohibited from calling a customer, even if they had an existing relationship.
Over the last two years, Edwards said he has spent $1 million trying to devise a computer system that could operate in compliance with the new regulations, but he hasn’t been able to.
“There will be companies that can get past them because all their business is done online, they know electronic signature,” Edwards said.
“I’ve been doing the same thing for 20 years. We were never powerful online. We were always powerful in mail and other sorts of advertising.
“I do mail pieces, or I call you.”
“Now you got to be careful as to what you say in the mail,” Edwards said. “It’s become such a vanilla operation.
“The problem was and still is, we don’t feel comfortable in anything we’re doing right now.”
Edwards said his fear is that, because he hasn’t as yet set up a system that would be in compliance with the new regulations, his company might inadvertently fall out of compliance — and draw further financial penalties.
“We’ve concluded that it’s no longer cost-effective for us to originate new loans for our nation’s veterans, nor do we understand how to implement these new government guidelines,” Edwards said in a prepared statement.