Having done so just yesterday, I wasn't planning on blogging about anything to do with mortgages quite so quickly, but a front page Monday article by Valerie Bauerlein in the Wall Street Journal was beyond my mortal powers to resist.
No, HomeBanc isn't the only mortgage lender to go bust. They're probably not even the only faith-based lender to do so.
But there are a few of things about the HomeBanc story that do stand out.
First, the widow's mite "severance package". Most of the 1,100 employees pink-slipped on Friday received a $20 gift card. The gift card was not exactly a severance package, per se. It was all that was left in the emergency kitty that employees had funded via voluntary payroll deductions. The $20 - so paltry and demeaning - is, naturally, part of a "compare and contrast" with the $5M package that Patrick Flood, the former CEO, walked away with in January. That's a lot of manna. If they'd only been half as kind to Mr. Flood, they'd still have had $2,000 for severance for the rank and file folks. But, of course, the $5M was then - January's a long time ago - and the lay-offs are now. Still, it's hard to resist a little after-the-fact question regarding the size of Mr. Flood's farewell gift.
There may, however, be some good news for those who lost their jobs. I'm guessing that the just sacked employees who had been short timers will not have to pay back their $60K in training costs, which they were obligated to reimburse HomeBanc for if they didn't last 3 years on the job. The training, of course, may only have been good for hard-sell mortgage lending, and there may not be that many jobs opening up in this field for a while. Or at least we can hope not.
My favorite numbers in the article, however, were the reserve numbers that HomeBanc maintained. On $5.1 B in mortgages last year, they were holding only $39K in reserves to cover loans that went bad. They had recently upped the reserves to $340K, but for a company writing loans to people whose credit-worthiness was often determined by the faith they shared with their lenders, $340K sounds pretty darned low. Let alone $39K, which wouldn't even cover someone defaulting on a loan on a trailer. Maybe they were counting on a loaves and fishes strategy.
($39K. How can that be right? It sounds like a number right out of the First Farmer's Bank of Dustbowl, not something that would work in this day and age.)
Golden parachute. No severance for the little guy. Shaky financial underpinnings.
We've heard all this before.
What we haven't heard, however, are the words of Mr. Flood, who is hell-bent on jumping into the faith-based mortgage market again.
He says HomeBanc employees and customers will take what they learned and plant the seeds wherever they land. "When Jesus got on the cross, people at the time thought that he failed because he died and the ministry ended," he said. "But people around him have cascaded it into the greatest movement in history. The company being a financial failure doesn't mean that the work has ended."
What are we to make of this odious little comparison?
If I were a faith-based person, I think I'd be offended.
Miracles do happen, but I'm guessing that the people around Mr. Flood will not be cascading him into anything near the greatest mortgage banking resurrection in history.