Gleacher & Co. delayed the filing of its annual report after a mortgage-lending unit that the New York-based securities firm has been building since 2010 was deemed this month in default under agreements with its lenders.
The subsidiary, ClearPoint Funding Inc., was able to obtain waivers from the three providers of its so-called warehouse lines of credit as its parent provided additional guarantees on some of its obligations, Gleacher said today in a filing with the Securities and Exchange Commission. Warehouse lines are used to finance lenders’ new mortgages until they’re sold.
The default may reflect how smaller lenders are being roiled by companies pulling back from roles as so-called aggregators in the mortgage industry, even as competitors seek to fill the gap. In the past six months, MetLife Inc. shuttered almost its entire home-loan unit, Bank of America Corp. closed a division that purchased mortgages from correspondents and Ally Financial Inc. has said it’s reducing such buying.
“In recent months, ClearPoint has experienced liquidity constraints” that “have resulted principally from the rapid expansion of ClearPoint’s business coupled with an unanticipated slowdown in loan purchases by one of ClearPoint’s principal loan purchasers,” Gleacher said in the filing.
The company dropped 4 cents to $1.28 a share as of 11:30 a.m. in Nasdaq Stock Market trading.
Gleacher agreed to buy ClearPoint in 2010, seeking to capitalize on the collapse of hundreds of originators from 2006 through 2009 and later retreats by survivors from areas such as lending through brokers, Mark Pappas, who has headed the unit, said at the time.
Pappas and Robert Fine, who has overseen ClearPoint as the head of Gleacher’s mortgage-backed securities, asset-backed securities and rates division, didn’t immediately return telephone messages seeking comment. Pappas was a founder of a lending unit of MortgageIT Holdings Inc., which Deutsche Bank AG bought in 2007 and then closed during the financial crisis.
ClearPoint was deemed in default by its warehouse lenders because of “covenants relating to liquidity, net profit/loss and certain notices for various periods from October 2011,” according to the filing. Gleacher said it has guaranteed obligations related to the lender’s need to return some borrowed funds if it can’t sell loans in certain timeframes.
While there is a “highly liquid market for these loans,” the guarantees may cause Gleacher to face a “liquidity shortfall” in certain circumstances that would have “material adverse effect” on the heath of the company or subsidiaries, according to the filing. The firm expects to submit its annual report within 15 days of the normal deadline, it said.
Aggregators in the mortgage industry are the companies that package loans that they make, fund through brokers or buy into securities, which are now almost all government-backed. The role is usually taken on by firms that retain the contracts to service mortgages that get split off from the actual debt.
ClearPoint’s revenue totaled $46.9 million last year as it posted a net loss of $3.7 million, according to the company’s earnings report last month. The unit’s $20.8 million of revenue last quarter was “significantly higher than the third quarter, which is again proof of concept,” Gleacher Chief Executive Officer Thomas Hughes said on a Feb. 9 conference call with analysts.