Fieldstone Mortgage files Ch. 11 bankruptcy
Citing rising mortgage delinquencies and tightening credit markets, Fieldstone Mortgage Co. has filed for Chapter 11 bankruptcy protection.
The Columbia company’s board of directors agreed to the move in a special meeting held Nov. 23, according to documents filed in U.S. Bankruptcy Court for the District of Maryland. Fieldstone said it has liabilities of more than $100 million. Among its largest creditors are Morgan Stanley, seeking $38.5 million, and Bear, Stearns & Co., seeking $15.3 million, documents show. A financial affairs statement and other information were not yet on file Monday.
Fieldstone originates, sells and services residential mortgage loans. Fieldstone’s focus is “non-conforming” loans, which do not meet the guidelines of mortgage giants Fannie Mae and Freddie Mac — for example, because of a low down payment or a borrower with a spotty credit history.
In an emergency motion filed with the bankruptcy court, Fieldstone details how slowing home price appreciation and rising interest rates kick-started a surge in mortgage delinquencies beginning in late 2006. This contributed to mortgage lenders reaping lower premiums on sales of loans in the secondary market faxless payday advances. The lower valuations in the secondary market in turn led to mortgage lenders “receiving unprecedented margin calls from their secured creditors,” documents show.
On Aug. 1, Fieldstone was no longer able to access the credit markets, according to the motion, and was unable to originate residential mortgage loans. Most of its employees were subsequently laid off, and “the debtor was unsuccessful in its efforts to resolve its liquidity crisis outside the bankruptcy forum,” it said in the motion.
In a Chapter 11 filing, companies seek to reorganize their debts.
Fieldstone originated $5.5 billion in mortgage loans last year. Its parent company, Fieldstone Investment Corp., agreed in February to be acquired by Credit-Based Asset Servicing and Securitization LLC, or C-Bass. The deal was finalized in July.
New York-based C-Bass issues, services and invests in “credit-sensitive” residential mortgage assets. C-Bass’ funding comes from MGIC Investment Corp. (NYSE: MTG), Radian Group Inc. (NYSE: RDN) and C-Bass’ management.
Fieldstone shareholders approved the deal in May, at a lower per share price than was originally proposed, because of the turbulence in the real estate industry wrought by the subprime lending crash.