The mortgage company controlled by St. Petersburg business icon Bill Edwards can't catch a break lately, with the latest setback an announcement that his Mortgage Investment Corp. will lay off more than 300 workers.
Edwards got some ugly press three weeks ago, when Mortgage Investors Corp. agreed to a $7.5 million fine with the Federal Trade Commission over claims it violated the Do Not Call registry and misled other consumers about the terms of loans.
However, Edwards on Wednesday said the layoffs are unrelated to the FTC settlement. Instead, the company has suffered from rising interest rates, which make refinancing less attractive, and from a shortage of investors willing to buy bonds backed by mortgage loans. Companies such as his often sell off their mortgages to such investors, freeing up money to make more loans.
Listing a host of other recent layoffs by big banks, Edwards said, "I'm with the rest of the refi guys."
Edwards notified the state of Florida of as many as 380 layoffs in a letter sent Tuesday. In it, he says Mortgage Investors would lay off 260 employees on or about Tuesday, followed by another 120 layoffs by Friday.
On Wednesday, he said the actual layoff count would probably be less than 380, but still would account for at least a third of his company's 975 employees. He'll give affected employees two months of severance pay, he said.
Behind the layoffs was a sudden surge in interest rates, which have risen more than a full percentage point in the last few months. Average mortgage rates on a 30-year, fixed-rate loan are around 4.37 percent, according to mortgage giant Freddie Mac, up from 3.35 percent in May.
Mortgage Investors specializes in refinancing mortgages for U.S. veterans. Given the run-up in mortgage rates, it's not surprising Mortgage Investors has taken a financial hit, said Kay Hubbard, a Tampa mortgage broker not affiliated with Mortgage Investors.
Her own mortgage company is doing less refinancing, because current mortgage rates aren't low enough to entice customers, she said.
Meantime, there are too many mortgage companies trying to sell off their mortgages in bonds called "mortgage-backed securities" and too few buyers, Edwards said.
"These circumstances have greatly impacted our ability to refinance mortgage loans and sell them in the secondary market," Edwards wrote to the state this week.
This is just the latest headache for Edwards, who has become one of St. Petersburg's best-known businessmen. He purchased and is renovating downtown St. Petersburg's struggling BayWalk shopping complex, and he operates downtown's Mahaffey Theater.
Aside from his recent FTC fine, Mortgage Investors is one of six mortgage lenders targeted in a whistle-blower lawsuit for allegedly charging hidden fees to veterans, in violation of an agreement with the Department of Veterans Affairs.