First Guaranty cuts 75% of its workforce
First Guaranty Mortgage Corp. emptied its workforce on Friday in one of the largest and fastest layoffs in the industry this year, blaming large operating losses for cutting its payroll by 75%.
The Plano, Texas-based lender disclosed the layoff of 428 of its 565 employees in a worker adjustment and retraining notice filed in Texas on Friday and released Monday. The layoff was first reported by HousingWire. The company confirmed the layoffs in a brief statement sent to National Mortgage News, but did not release the number of employees affected.
“FGMC has experienced significant operating losses and cash flow challenges due to historical unanticipated adverse market conditions for the mortgage industry, including unanticipated market volatility,” wrote Cassie Vacante, senior vice president of company’s human resources in the WARN notice.
Last Thursday, the lender gave affected staff their final paycheck but blocked access to the online system so they were unable to understand why they would have received more than the normal. The FGMC also told employees the office would be closed on Friday, according to former employees who spoke on condition of anonymity to National Mortgage News. The layoff announcement was reportedly made by CEO Aaron Samples in a pre-recorded Microsoft Teams message of about 10 minutes.
The company did not respond to the allegations in an emailed statement Tuesday.
“FGMC continues to fund loans and actively engage with its consumers,” a company spokesperson said. “We want to clarify that we have paid salaries, accrued PTOs and commissions that have come due and are in the process of providing severance pay to those who are eligible.”
The WARN notice included a redacted list of job titles cut, and former employees allege Friday’s cuts involved employees in all departments and positions.
An effort to secure funding to prevent the layoff failed, according to the WARN notice. Investment giant PIMCO, which took a stake in First Guaranty in 2015, did not respond to a request for comment.
FGMC less than two weeks ago announced a new fixed rate second lien product for its Retail, Direct Consumer and Mortgage Broker distribution lending channels. A former worker alleged that the company’s wholesale channel was receiving high-single-digit daily loan requests in the weeks leading up to the layoff.
The company’s mass shooting on Friday was one of the largest one-day shootings in the middle of the latest industry cycle reductions in the face of rising interest rates and other market uncertainties. JPMorgan Chase laid off hundreds of home loan employeesalthough the final count was not disclosed, while brokerage firms Compass and Redfin earlier this month cut 450 and 470 workers each.
First Guaranty’s alleged Microsoft Teams announcement recalls digital lender Better.com laying off 900 workers in a Zoom call Last year. This decision, which has prompted intense scrutiny and may have violated California’s WARN notice law, according to a recently filed lawsuit.