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SouthStar Funding Implodes, Leaves Borrowers Stranded
Here is this morning’s installment in the ongoing subprime meltdown. Realtor and borrowers need to be very cautious, even when borrowers appear to be fully approved. Lenders are shutting down suddenly, cancelling loans, and leaving borrowers stranded.
As fewer options remain, the type of loan for which you or your client were qualified may no longer exist. As always, be sure you or your client are working with an experienced lender who has been through this type of market before and knows how to guide you and advise you.
Dear Customer,
SouthStar Funding, LLC has ceased its mortgage lending operations effective immediately and is unable to close or fund any loans. The closing agents have been instructed to cancel any pending closings and are not authrorized to close or fund any loans from this point forward. The closing agents have been further instructed to immediately return any funds which have in their trust accounts to the source of the funds, wheteher SouthStar or one of its warehouse lenders.
We appreciate our relationship with you through the years and regret that this decision was necessary due to unprecedented downturn and policy changes in the mortgage industry.
If you have any questions, please contact the company at 1-800-567-9385.
Sincerely,
Kirk Smith
President
Got a comment? Leave it below.
Got a question or concern about your loan? Send me an email.
April 2nd, 2007 at 6:18 pm
I dealt with South Star in Atlanta, Ga. on a regular basis. This is a sad situation. I was told that they were planning to sell over 100 million in loans that were underwritten on their core product line to an investor and the investor backed out which inturn caused their warehouse lines to be frozen. Negotiations took place but an agreement could not be made. I feel so sorry for such a great company to close. There were some first class people there and they are all unemployed with little or no severance. They will be very beneficial to another company but I doubt their will ever be another SouthStar Funding. They were the best. Our rep was too.
April 2nd, 2007 at 7:17 pm
Yes Amy, that’s the problem: investors either refusing to purchase, or forcing buy backs of large portfolios when there are too many early payment defaults. This wipes out the company’s net worth and their warehouse lines of credit.
Lots of great people on the street looking for work as a result…..it’s tragic.
Thanks for leaving your comment!
April 3rd, 2007 at 8:54 am
Until yesterday, I was an Area Sales Manager for SouthStar. The sentiments Amy posted are very touching indeed and as a testament to our (former) company, are also quite common amongst our client base. It is that two-way loyalty with the Amys of our world that made us successful.
Because I now apparently have some time on my hands :o) I wanted to make a few comments…as much for theraputic reasons for myself as anything, but also becuase there are some misconceptions that are rampant in this current environment and unless you are a true insider to the industry, you may not be privvy to all the intrigue that is really taking place. First of all, I want to take a moment and defend the owners of SouthStar even now. They are three of the finest men you will ever meet. They are men of character and true leaders and there are several hundred people that would leave whatever new jobs they get for the chance to work for them again.
I wanted to comment a little on what is being called the “sub-prime” meltdown. Much of what Marc Brinitzer is saying is correct, but there is a much more sinister side to this situation that you need to hear about. Since the name of this website is Lending Clarity, I feel compelled to explain. Let me start by saying that SouthStar was FINANCIALLY HEALTHY last Thursday. We had made the necessary layoffs to properly staff us for the amount of loan volume we were currently experiencing. We had grown to accommodate the huge volumes of loans we had been closing fueled by the housing boom of 2004 and 2005. Many other small to medium sized, privately held companies are still in that same boat. We were producing about what we needed to at least break even and weather the storm until the market indeed rebounded. We had plenty of cash reserves in the bank. Our warehouse lenders had audited our financials on a weekly basis, and were quite pleased with our situation. We had even negotiated no Early Payment Default (EPD) language into our commitments with our investors so that the problems plaguing many other wholesale lenders would not harm us. There was absolutely nothing but a bright future on the horizon for SouthStar and that is what ironically precipitated our demise.
When you swim with the sharks (Wall St), it is best not to look like a pork chop. As you are probably aware, Wall St. has been snapping up wholesale lenders at fire sale prices for the past year. Our two largest investors had made purchase offers to us in 2006. Our owners refused to sell. When those same investors acquired other wholesale outlets, it made SouthStar a direct competitor with our investors. Wall St. started to view us in a different light. The large pool of loans that they refused to buy after they had already comitted to do so were A Paper loans, not sub-prime. Only 30% of SouthStar’s business was sub-prime and A-paper loans don’t have EPD issues. They demanded a huge amount of cash as a deposit against the POSSIBILITY of EPD’s on these loans knowing full well what it would do to us. We hadn’t negotiated “no EPD language” into our A-paper loans because there was never a need. To write the rediculous check they were demanding would put us in violation of our contract with our warehouse lines with these same investors, and we were instantly out of business. bottom line: this was a very deliberate act by two Wall St. investors to eliminate a competitor. There are many other privately held companies who will experience the same thing in the next few months. Wall St. is greed driven and they won’t think twice about shutting down a company that they used to call a partner. They use the EXCUSE of EPD’s because it is so convenient to do so given all the recent press, but it is truly just Wall St. eliminating the competition.
The last thing I have to say is in regard to Aaron Krowne, the self-proclaimed crusader who runs a website that tracks the demise of sub-prime companies. Mr. Krowne is a blight. He is irresponsible, misinformed and arrogant beyond measure. He knows so little about what is truly happening, yet he presents himself as an industry insider and watchdog. He erroneously reported back in February that SouthStar was having trouble meeting its payroll obligations. This was completely untrue yet he posted it anyway. The end result was that he contributed to the 2nd round of layoffs at SouthStar. Word got out that we were in trouble and our volume dropped. It forced us to reduce staff even further, but at no time were we ever “in trouble”. He is now gloating over the demise of SouthStar, but every dog has his day, and Mr. Krowne certainly qualifies as a dog.
Thanks for indulging me in my long-winded diatribe. If you take anything away from this message, please take the knowledge that the vast majority of wholesale sub-prime lenders are just conduits for Wall Street. Any sub-prime loan that goes bad is due to Wall Street’s lending practices, not the SouthStars of this world. These loans existed because Wall St. wrote the underwriting guidelines. Companies like SouthStar just provided a sales conduit. To blame the wholesalers is misguided. Doing buisiness with any privately held company is now a risk as long as Wall St. is in this mode of consolidating the industry.
Take care and I hope you have success in all areas of your lives.
Regards,
Mark Clay
April 3rd, 2007 at 10:21 am
Mark,
Thanks so much for stopping by and providing a true insider’s view of what happened. It is very difficult for the average person–or even an experienced originator– to see clearly into the ball of snakes that is mortgage secondary market.
Your comment about Wall Street deliberately putting SouthStar out of business is particularly unnerving in light of Wall Streets ability to spin this as just another bad lender in the subprime meltdown.
April 3rd, 2007 at 1:06 pm
Thank you, Mark for your unbiased approach to reporting this issue. You are frightening correct in your assessment of Wall Street’s efforts to deflect responsibility from their despicable activities. It’s like watching the mayor of a big city campaigning against drug dealers only to find out that he is supplying them in the first place. It’s all smoke and mirrors designed to hide the fact that Wall Street is just being Wall Street and doing what they do best–make money at the expense of anyone.
There will be many more good, reputable sub-prime lenders forced out of business before this is all over. The worst part about it is that they wont even see it coming. It’s not even a face to face fight–its a knife in the back by somebody who calls themselves a partner. Such are the risks you take when you swim with sharks.
Thanks again for the opportunity to speak on this forum.
Mark
April 3rd, 2007 at 3:39 pm
Mark,
Thanks again for sharing your insights. I emailed the other 400 or so Loan Officers here at American Pacific to come read your comments.
Feel free to return and add to what you written already. This is a fresh perspective that valuable to us all.
April 3rd, 2007 at 10:03 pm
Thank you again for your gracious offer, sir. I feel that the more an LO knows about all facets of the industry, the better they’ll be at their job. I do want to state for the record that there are a significant number of Sub-prime lenders who have indeed contributed to their own demise, but fortunately for our industry, most are now out of business. Wall Street actions aside, the market has a way of self-policing itself. The temptation is, however, to lump all companies who have gone out of business into the category of “irresponsible”, or “predatory”. We all know that there are many phases of a loan origination that are vulnerable to predatory practices. What is ironic, is that in reality, the retail loan officer is just as “incented” to put somebody in a loan that has no business being in it as the lender is. Typically the retail LO makes much more per deal than the wholesale lender. The latest example of this has been the typical 1-month MTA option arm. Yield spreads of 4% or more are still common as the “wrong” LO learns to sell the minimum payment in exchange for windfall profits on each deal. Even charging no origination makes for a pretty good paycheck on 4% minus the shop’s split. This is not to say that it is/was not a good loan. I believe it is a great loan for the right borrower. The problem is two-fold. The LO wants to make the money the lender wants to sell the loan and the borrower just wants that tiny little interest rate associated with the minimum payment. I admit that the temptation on say a $600K loan is pretty significant and I myself have closed those deals when my conscience kept trying to get my attention. (One thing I am not is a hypocrite)
Here’s where the cycle starts. One lender pays 3% in ysp. The next lender pays 3.5% by raising the margin just a little bit. The cylcle continues, until the only thing anybody sees is the loan amount and the ysp–or the commission if you are a wholesale AE. The borrower ends up with a note rate well above the market rate on a traditional P&I loan, and ends up with all that differed interest–not to mention a 3yr hard prepay so that ysp could be maximized. Wall Street has actually taken more (legitimate) heat over neg-am option arms than its sub-prime deals. The difference? Option arms are A-paper products and they typically perform better, meaning the borrowers usually make their payments. Not hard to do if your interest rate is 1% as compared to the poor sub-prime borrower who is paying 8.5%. No defaults means no bad press.
I sincerely feel that there is a significant amount of industry fallout yet to occur specifically relating to neg-am loan programs. Already numerous states have grappled with the concept of defining the term “predatory lending”, yet because they are also uneducated, their attempts at regulating this type of activity is often misguided. If housing prices do not rebound fairly quickly, MTA based option arms will be the next villian–and hence the next opportunity for the Wall St. sharks to squeeze out more of the competition. It’s coming folks…even when short term rates will start to decline, the MTA index, being a rolling 12-month average, is going to continue to rise for months afterward. Borrowers will hit their 110% to 115% neg-am cap, the loan will recast raising their monthly payments significantly and the borrowers, saddled with a prepayment penalty, will not be able to refinance. They will start to default on their payments and the “Neg-am Lender Meltdown” will be underway. Hybrid ARMs (the fixed 5yr ARMs are a better option because they defer less interest, but they can still bite the borrower hard once they hit the neg-am cap.
Thanks again to Mark for allowing me to pontificate on the ills of the industry. It has truly been theraputic for me. Feel free to post any specific questions. I will answer them if I can. I seem to have some time on my hands for the moment.
Regards,
Mark
April 4th, 2007 at 5:56 am
I left SouthStar over a year ago but filled out a survey before I left. The question was where do you see SouthStar 3 years from now? I answered if the owners were smart they would sell the company now, otherwise it would be out of business. I find it mind boggling that no one at SouthStar could see the impending problems ahead with the kind of loans they were selling. Furthermore, with no competitive advantage over its competition in the marketplace the company was in no mans land in terms of positioning. It is weak to blame this downfall on its own customers (Wall Street) and not the poor management that ran the company with no strategy or insight into the marketplace. I guess they are kicking themselves now for not selling when they had the golden opportunity.
April 4th, 2007 at 6:40 am
Unfortunately Mike, you do not know the whole story. What I said in my initial post was absolutely true. We were deliberately put out of business by one specific investor because we were a competitor to their wholesale division. It was stated in so many words by that investor. Say what you will about the company and its leadership, but non-Wall St. owned companies like SouthStar are ALL in the same boat. To say they are kicking themselves now shows me that you didn’t know their character very well. They had the chance to sell many times, but chose to continue on with the vision that it would be poised for a great run when the market corrected. Thank you for your post. I respect your opinion.
Regards,
Mark
April 4th, 2007 at 12:31 pm
I have read many different blogs about SouthStar Funding. I have been an LO for over three years and just accepted a position as an Inside AE for SouthStar in Atlanta. I was completely blindsided by this. I knew of all the companies going out of business and that made me a little worried. I did a ton of research on SouthStar and found absolutely nothing negative about them anywhere other then Aaron Krowne’s comments. I would like to thank you Mark for shedding some light on the subject to me since no other person could answer any ?’s I had. I wish you the best with your future company and it looks like it’s back to the phones for me.
April 4th, 2007 at 2:11 pm
This is a powerful example of how powerful Wall Street is in terms of manipulating a segment of our economy. We learn this lesson over and over it seems. Saving and loan scandal, the Michael Milliken bond scandal (which are being sold again on Wall Street as though there was never a problem), multiple corporations proven to be corrupt in their financial governance. Wall Street inflates the boat and rides the waves until they turn into a perfect storm, then it jumps ship and leaves everyone else bailing water. It has happened time and time again. What is so surprising to me is that we are always surprised when it happens. SouthStar should have had protection for its A paper just as it had for its subprime papers because apparently that was the only loophole Wall Street needed to shut them down.
Wish this was a story with a happy ending…these people sound like an amazing group of individuals and they certainly did not deserve this treatment nor did their clients.
April 4th, 2007 at 5:32 pm
Mark, I agree the neg am meltdown is next. Most evil and deceptive of all are the 5 yr fixed payment neg am loans. The reason? The yield spread is buried in the margin rather than in the start rate everyone sells.
To max out the yield spread, margins are pushed into the 4% range, taking the fully indexed rate over 9%.
Combine that with a 1% “fixed payment” and you hit the deferred interest cap after 20 months and find your payment tripling.
April 4th, 2007 at 9:17 pm
[...] SouthStar Funding Implodes, Leaves Borrowers Stranded [...]
April 4th, 2007 at 10:35 pm
For all the former Southstar employees who lost your jobs, sorry but that’s life. Anyway, in all the 7 years I’ve worked in the mortgage industry, I have never been able to close a loan successfully through Southstar. In my experience the Account Executives and underwriters never took my business seriously and in my opinion were arrogant, rude and slow. Fact of the matter, you got beat out by your competition because you SUCKED!! I’m sorry there were other issues outside of Wallstreet, so stop being naive. Don’t let the door hit you where the good Lord split cha!! Good riddance!!!
April 5th, 2007 at 5:37 am
Hmmm…
With an attitude like that hahaha, I am absolutely surprised that underwriters are not racing to do business with you.
The impression I get is that SouthStar had fairly high standards and looked to do business with the best.
April 5th, 2007 at 9:09 am
In my 18 years in the business Hahaha, I have seen only a couple of companies with pervasively bad customer service philosophies. Yet even when forced to use them, I have closed plenty of loans successfully, if painfully.
Overall, the comments I have read so far from those who have done business with SouthStar have been favorable. Maybe you got a grumpy underwriter or a rep who didn’t return your calls promptly. Or, maybe it’s your files that sucked.
One way or another, there are a lot folks suffering right now. Your comment is remarkably insensitive.
April 5th, 2007 at 9:33 am
I am truly touched by the thoughtfullness and overall sensitivity of those posting on this blog. Hahaha is certainly entitled to his opinion. If we sucked, then we sucked to the tune of $450M per month average even in this market. We never tried to present ourselves as the right fit for every broker. We definitely had a specific business model that catered to clients with equally high standards. I have no knowledge of Hahaha’s file types, experiences with underwriters, AE’s etc. I just know we always strived to provide the very best personal service and we dealt harshly with any SouthStar employee who was not completely committed to being the best. I hope Hahaha has found a good partner to work with. The name of this game is “relationship”, and the best part about it is that there is a good fit somewhere for everybody’s style of business–you just have to find it.
To Dewayne, I’m very sorry that happened to you. I was very close with many in the Atlanta Inside Sales group. The implosion caught absolutely everybody off guard. Kathleen was right when she said SouthStar should have had some protection in place for its A-paper products as well. If there is one area our owners didn’t cover, it was that one. To their defence, when you work with somebody successfully long enough, you start to trust them. It’s just human nature. That’s when they pounce and remind you all too painfully, that this industry is very much a business and relationships at almost any level are unfortunately expendable.
The good news is that becuase SouthStar did have a very good reputation in the industry, many of our people are quickly being absorbed into other companies. I’ve been monitoring our bulletin board and many folks have been sharing information on who is hiring so that people can find jobs quickly. It’s still very much a family taking care of its other members. I miss them much.
Regards,
Mark
April 5th, 2007 at 5:36 pm
Thanks again for your insightful comments Mark. If SouthStar Funding was made up folks as thoughtful and articulate as you are, it must have been a great place to work.
Here in Sacramento, we recently watched a 30 year company and one of our strong competitors sink overnight. Central Pacific Mortgage and my company have shared a lot of people and branches over the years. They were seasoned, smart, and ethical. But this market doesn’t forgive mistakes well.
They didn’t suck. They were a good company like many out there, made of mostly people with no idea what just happened. It’s unnerving to think that a deliberate Wall Street squeeze play put them out of work.
April 6th, 2007 at 11:56 am
I am a competitor of SouthStar albeit a small one. We try to stay away from selling directly to Wall Street, only using Cit, Countrywide and those types. We were able to diversify our income stream and remain very stable given the industry.
I do not mean to sound callous, but I would like to talk with anyone at the A/E level.
April 6th, 2007 at 12:57 pm
Zack,
You didn’t sound callous at all. As a matter of fact, I’m happy that you are able to stay stable and thrive in this market. Your company is much like SouthStar was about 4 years ago.
I went to your website and saw that you are the owner of First Choice Funding. Just so you know, I’ve been writing my novellas on this blog as a form of therapy for myself as I sort out what happened to my beloved SouthStar this past week. Mark Brinitzer has been gracious enough to allow me to do so and so that those who read this get some value out of it, I’m trying to be as educational in my approach as possible. I say this because what I’m about to explain would sound completely condescending if it were just the two of us having a conversation as you are obviously very much aware of what your company is doing. However, many LO’s may not understand the difference between selling direct to Wall St., and conduit lending–which is what FCF does. The only problem with conduit lending, is that there are now two middlemen (your company and the CIT’s, CW’s, WAMU’s, etc) that need to make a profit. You are indeed more insulated from the “sudden death” that is happening widespread to the SouthStars of the market. The downside is that as you grow and your fixed costs grow with you (thus your need to make more profit), your pricing is most-likely not in line with many of your larger competitors. In other words, you have the sell the heck out of your service–ie, your turn times, your expertise in the market, your make-sense underwriting, etc. in order to make up for the half point + that you are, or will be out on your rates. Been there, done that for a long time. Selling service is great and it works well when your company is agile to market conditions and still able to maintain those amazing service levels. As most of the LO’s reading this blog will tell you however, great service may buy you a quarter point, or even a half point out in some cases, but much more than that, and the cost of using your company over a cheaper competitor will dramatically increase their willingness to deal with a little brain damage to get a deal done.
That is the same boat we were in a few years back. To get the pricing you need to stay at least in the ball park, you gotta go to Wall St…and when you give the devil a ride, you gotta know that he’s eventually going to want to drive.
If you are looking to speak to some SouthStar AE’s for hiring purposes, I will happily post on our yahoo page that you are possibly looking for people. I don’t know what markets you are specifically looking for, but we have AE’s everywhere–and they are top-shelf all the way. If you would like me to pass along your contact information from your website, just let me know and I will gratefully do so. Your company looks like it’s quite a tight-knit group and that is what SouthStar was also known for. My email address (mclay@southstar.com) will be active until Wednesday of next week, so if you have a little time, maybe you could contact me directly. Thank you, sir.
Regards,
Mark
April 10th, 2007 at 11:48 am
There is plenty of blame to go around but here is my take on the prime reasons for the demise. The allowance of no down,stated and no doc income programs to NOO and wage earners; unscrupulous players who were allowed into the industry because of the lack of background check and experience requirements; the insatible greed of REA’s and LO’s; the brokers who catered to those greedy REA’s and LO’s; the regulatory allowance and proliferation of net branching; the lack of basic due diligence on the part of the originating broker and wholesaler; the arrogant and/or inept wholesale reps and UW’s; lack of stringent regulatory oversight and enforcement and WS’s overly broad and aggressive closing of the programs. The result being legitimate FTHB’s being left out of the market.
Those of us that have been around for a few years (in my case 24) have learened to live with such imminent upheavals and will survive and continue to prosper.
I never did any business with SSF so I cannot comment, but rest assured there will ALWAYS be a home and/or welcome mat for LO’s, reps, UW’s, etc who understand customer service, possess honesty and are of good character.
The rest will fade away as the market is efficient and will [ultimately] police itself.
Sounds like Mark Clay is one of them.
April 10th, 2007 at 1:46 pm
[...] It is an interesting read on an interesting blog. Go take a look. [...]
April 10th, 2007 at 4:04 pm
Robert, you have certainly distributed that well-earned blame generously, and I tend to agree with you.
The one group you neglected is the desperate and greedy consumer who either checked their brains at the train station in their rush to board, thought they were so special that that 1% rate they were promised was really fixed for 30 years, or who thought that a windfall profit was an entitlement for newly minted real estate speculators.
Over the last three years, it wouldn’t be an exaggeration to state that 50% of the buyers in several subdivisions where I do loans were flippers fresh out of their $10k seminars. I’d pre-qual them and when I pulled a fresh credit prior to close, they’d have bought 4 more houses, all owner occupied, all 100% financing. By the way, those folks make up the bulk of the EPD’s (early payment defaults) that have resulted in huge buybacks, and taken down many of the subprime lenders.
I have little sympathy for those consumers.
April 10th, 2007 at 4:31 pm
Marc I am not trying to be holier than thou, but while you are right as to the consumer it is our responsibility to stop them by either not doing their deals or turning them in once you discovered the scam.
I wholeheartedly agree the OO shisters should be held accountable, but I can assure you in litigation you will be held as the expert and they as the “victim”.
I was almost burned about 10 years ago by a CO investor and have passed on all investor deals ever since. I know I missed out on tons of $, but it just wasn’t worth it to me.
My niche of catering to the legitimate FTHB market has allowed me to sleep very soundly.
April 27th, 2007 at 9:28 am
I can’t quit laughing at these post. Let me enlighten you all, SouthStar Funding fell because the majority of the loans they sold were fraudulant. All but a few honest AE’s did nothing but loans that were not worth the paper they were done on. These AE’s knew what they were doing, they wanted a quick dollar. They knew they could make some money and them go back to their used car sales job. Next you have the people on the inside who were to stupid and inexperienced to realize what they were looking at, and when a select few pointed it out, they had no care for the company so ignored it. It was destined to go under with these crooks working for them. So her is the truth, it was not Wall Street, it was not the competition, heck it was not even the owners{they must have had no idea what was going on}, it was the CROOKED AE’s and UNDER EXPERIENCED{stupid and in a position they never should have been} employees that were the down fall of this company
April 27th, 2007 at 10:11 am
Wow Suzanne. You certainly seem to have an ax to grind here. Condemning a whole fleet of CROOKED AE’s and UNDER EXPERIENCED and stupid employees is harsh judgment indeed. Maybe you can share with our readers your credentials for dispensing such sharp criticism.
What is your experience working with this company? Have you been brokering loans to them? Are you a consumer? Tell us more…
April 27th, 2007 at 12:16 pm
Funny?? These posts are funny, Suzanne??
It’s taken me a while to settle down enough to write a response to your post as I must admit, your post pushed all the wrong buttons in just the right sequence. Like Marc, I too would love to hear what inside information you have that qualifies you to make such sweeping character judgments on some of the finest people in the industry.
Until you actually know the intentions and capabilities of the people of whom you are speaking, your opinion is just as shallow and uninformed as the character you embarrass yourself with in your posting. I would happily respond to any direct question (or accusation for that matter) that you may have regarding myself or anybody else at SouthStar that I may have experience with. I’m no guru, but I have some knowledge and will always give an honest answer–even if it is not flattering to my position. If all you want to do however, is throw around unfair, uninformed and spiteful comments, then please go somewhere else and stop insulting the intelligence of those who are serious about this profession as you have nothing of value to add.
I could write more, but I guess I need to stop by the cleaners and pick up my plaid jacket on the way to my job at the used car dealership. (By the way…that’s sarcasm, Suzanne)
April 28th, 2007 at 10:36 am
Suzanne:
We all talk about open disclosure. Let us see yours. You do not even reveal your last name yet spill forth such venom.
Those of us are honorable are not afraid to state who we are or our experience.
So start with your last name and then cite real details supported by your facts and your experience level. This is the least you can do since you have intimated you are either an insider like Marc or have possessed a demonstrable relationship with the SSF company.
You need not worry about libel unless of course you cannot back up what you are posting!
May 1st, 2007 at 5:14 pm
I worked with Southstar Funding for almost 2 years before I left last year…..I’ve been in the wholesale industry for about 6 years and I worked for the two largest companies and a mid sized company and small company like southstar…..Out of all the companies I ever worked for Southstar was truely my favorite. After i left southstar funding and started my own brokerage I submitted about more than half my business to southstar funding. We did about 6 million a month and about 2.5 to 3 million went to southstar….NOt only did i love my AE, but I respected the knowledgeable U/W and Production Managers. I was truely shocked to hear Southstar had to close its doors…From the month I started my training in Atlanta and Met Kirk and the rest of the executives i knew i had made the right decision to come work for such a great company…
May 1st, 2007 at 6:26 pm
Word is alot of sales people and experienced admin staff went to Bayrock Mortgage to get there outside sales division rolling
May 2nd, 2007 at 5:01 am
Good to hear from you again, Khos! I hope all is well, sir.
Nichole is correct, but the vast majority of those people, (including one of the former Owners) are involved in the east coast with them. I bet they do very well there.
May 20th, 2007 at 7:38 pm
southstar had horrible customer service, idiots employed, and arrogant showboat morons for AE’s I laughed the day they went out of business…and I am still laughing. Anyone who stays in mortgage at this time is a moron.
May 21st, 2007 at 11:07 am
“Anyone who stays in mortgage at this time is a moron.”
Or, maybe those who stay are those who were here originally, long before the cell phone and car salespeople jumped in to clean up scamming naive consumers.
Anyway, why so harsh dude? Why not come out of the closet and tell us who you are and why you have such a big chip on your shoulder.
May 24th, 2007 at 4:37 pm
not gonna happen.
anyway, lets face it…mortgage is for the people who wouldn’t even cut it as salesmen of cellphones let alone cars.
it’s for people who are too lazy to make it in real industry.
May 25th, 2007 at 9:24 am
I’m always amazed at the huge disparity in character between true mortgage professionals like Marc, Robert, Suzanne, etc. and people like this last individual. People who can’t make it in this industry immediately turn around and blame THE INDUSTRY rather than take a good look at themselves to discover where they may be falling short. Then, all they can seem to muster up are inflamatory statements hoping to solicit angry responses. They do their best to drag the true top performers down to their own level of mediocrity.
Ah, well…unfortunately “class” is not a pre-requisite for this industry as this last person so aptly demonstrates. No doubt, he/she is already looking for the next industry wave that allows for huge profits with almost no skills or work ethic–for that is exactly what he/she brings to the table.
May 25th, 2007 at 9:48 am
Marc I could not have said it better, except you included Suzanne with us professionals. I do not consider her one until she lays out her cards and reveals her credentials.
For the other individual and ones like him they are the first out the door and the first to blame someone other than themselves for their failure in the business.
Everyone thinks its easy, until the market changes and then they quickly discover that they actually have to “work” for that fat paycheck. They cannot or won’t and throw in the towel.
May 25th, 2007 at 9:50 am
Sorry I meant Mark, not Marc.
May 25th, 2007 at 9:59 am
wow…I can’t believe I included Suzanne in that last post, when I actaully meant Kathleen. I guess I need to pay a little more attention to the details!!!
Regards to all,
M
May 25th, 2007 at 10:16 am
Mark:
Just chalk it up to you’re getting old like me!
June 5th, 2007 at 2:48 pm
WOW!!! This post has been going on for some time. What I can say is that what Mark Clay speaks is true. I used to work for SSF (SouthStar) in Denver and I was an ae with Mark Clay at one time. I left after 4 years in order to start my own mortgage company. What some people are saying about aes is completely ludicrous. SouthStar aes were the most cautious out there and the UWs were even more cautious. I would prefer to turn down a file or not submit it if I even suspected fraud. I would do a 411 reverse to check the phone number and make sure it matched the property that someone would be trying to call primary. I always loved the chance to put someone like hahaha on suspension if he even gave my UWs one bad experience. The ft is - SouthStar had morals, professionalism, and they backed it up by doing what they said they could do.
Several times I had files where an UW missed a condition or did not verify enough reserves but approved the file by accident. What did SouthStar do - they approved the loan and they had to dump it on the after market and take a hit and lose money. But it was better to promise what we said we would do, rather than lose a customer. However, this did not lead to SouthStar closing their doors.
Simply put SouthStar ended up closing their doors for one reason - a couple of SouthStar’s investors simply refused to buy the loan pools. How do I know this - because 2 of the owners are my wife’s step brothers and the facts are what they are. There were noi EPD, no subprime loans involved, no fraud. SouthStar had one of the most strict fraud departments in the industry. We caught things that other lenders probably would miss. Sounds like hahaha was one of those guys that got his hand burned.
Regardless, SouthStar was one of the best companies I have ever worked for. Watch out for Bayrock Mortgage - they have the same product line and same philosophy on service. I believe that they will do very well in the coming years. It is correct that lots of SouthStar employees have gone there
Good luck to all!
Mark Clay, how are things? Give me a call sometime. Would love to catch up.
Mark
June 6th, 2007 at 5:40 am
my company has done business with southstar for close to 7 years now. unfortunately with their closing we lost nearly 50% of our business and we too will be closing shortly. for all of the negative postings on here i have to say that southstar was the easiest company to work with. i’ve dealt with kirk and mark and dawn and several others during the years and they were extremely pleasant to work with and very knowledgable. being in the industry almost 16 years you come across some unbelievably naive, crooked, basically dumb companies but southstar was my favorite. you tend to work harder, faster and more accurately for companies who treat you with respect and have a pleasant voice on the phone and southstar employees always did. what i’m trying to say is the trickle down effect has not been mentioned here. we are a proud company of over 20 years and southstar’s closing has almost caused us to shut our doors. i wouldn’t be commenting if it any other company. i would have worked for southstar if given the opportunity.
fyi, please don’t respond to the negative posts. i remember when i was 16 i would “troll” around and leave negative posts to see who would respond. not worth getting worked up over mark.
June 24th, 2007 at 2:24 pm
[...] It is an interesting read on an interesting blog. Go take a look. [...]
June 25th, 2007 at 9:50 am
What blog? The link goes back to this site?
June 25th, 2007 at 1:30 pm
Nicole, that was just a ping back from a comment made at RealEstatebloggers referring to this thread.
marc
July 12th, 2007 at 9:44 am
I worked as an U/W at SSF and believe fraud was all over the place. Most of the time, the AE’s and brokers were in it together. We tried so hard to kill deals or counteroffer them but we were always overridden. Sales really ran that company. Any time we tried to kill a deal, it was switched to one of those no income no employment deals. When we did verbal audits, we were told who to speak to and when to call. We were even told to inflate income if it made sense. I’m sure the owners didn’t know what was going on but believe me it happened.
July 12th, 2007 at 11:28 am
Wow! This is right from the horse’s mouth so it will be very interesting to see what Mark (Clay) has to say.
July 12th, 2007 at 2:03 pm
I have much to say as you can imagine, Robert. Obviously U/W chose to remain anonymous for a reason as there are approximately 220 former SouthStar AE’s that would have serious issues with those accusations. I’m not saying that there weren’t AE’s who pushed the boundaries of what we all recognize is a wide gray area. Part of the problem is the that wholesale lending is by its very nature an adversarial relationship between AE’s and underwriters. Notice how U/W said, “We tried so hard to kill deals…”. That attitude is completely unacceptable. “Killing a deal” should be a concession of failure and not an objective. You only kill a deal because you have to–when there are no other options to switch to. One of the distinguishing character traits of SouthStar was that we could take a borrower that didn’t fit into a particular program and switch them into one that they did fit. Fraud is by definition the intentional misrepresentation of material facts–in this case, on a loan application or its accompanying documentation. To take a borrower from even a full doc program and switch them to a NIVA is by no means fraud. Taking them from full doc to stated could be considered fraud. Doctoring W2’s, paystubs, VOE’s, etc. is unquestionably fraud. Notice the huge distinction. It is just smart business as those programs exist for just such reasons. It’s not always ethical to do so, but that is a completely different moral issue. These limited documentation programs are high-risk loans and the investor gets a premium in the form of interest rate for accepting them.
Also: sales SHOULD be the driving force behind and product-oriented business–especially a wholesale lender. Whether they choose to acknowledge it or not, all underwriters are sales people. They simply sell to a different client. The underwriting process itself is a sales job. They collect the information needed to package and sell that loan to an investor. If the investor doesn’t buy it, somebody didn’t cover their bases.
As far as being instructed to inflate income, it certainly wasn’t an AE doing the instructing as 1) they had no authority to do so and 2) they would have lost their job just by attempting it. SouthStar had a zero-tolerance policy for fraud with their sales staff as well. There were no warnings or second chances. Cross from gray to black and you were sent packing. I saw it happen to good AE’s who made poor decisions and crossed that line. The owners knew what was happening and I stand by their decisions all the way.
To quote Forrest Gump: “That’s all I have to say about that.”.
M
July 12th, 2007 at 4:21 pm
UW I should have asked for you to state your name as I agree with Mark that any professional should state their name.
Mark:
I was in a hurry and should have expounded, but you said it all as for me you are preaching to the choir brotha!
July 30th, 2007 at 4:25 pm
First of all, I would like to say that the integrity and character displayed in many of these blog postings is refreshing. The reason for my post is that I was wondering if any of you would happen to know if Southstar is selling any of their loans at this time? They are listed as the 2nd lien holder on a few defaulted properties I was looking at. I might have investors that are interested in purchasing these 2nd liens. If you could provide me with a contact or any information at all, I would greatly appreciate it.
Sincerely,
Jennifer
July 31st, 2007 at 7:32 am
Jennifer,
I truly wish I could help, but since SouthStar doesn’t even exist any more, there really isn’t anybody to call. If SouthStar’s name shows up on title, its because that loan hadn’t been transferred (sold) to an investor yet. I assume that the 2nd’s default back to the investor from the warehouse lender used to fund that loan. There were 5 investors that SouthStar used, so there really is no way to figure out who they are.
Sorry, Ma’am,
Mark
August 2nd, 2007 at 11:29 am
I worked in U/W in the Orlando office. Like any mortgage lender in this country, you’re always going to have a level of fraud and untruthfulness. There were CERTAIN AE’s who were extremely pushy and unethical but there were MANY others that were honest and good people.
I think you would find that at any other lender. I don’t think we can blame one thing…especially when we have over 100 lenders that are now out of business in this country.
August 2nd, 2007 at 1:50 pm
Ryan, you’re totally right. An organization will often have a “culture” that defines its values, but individuals within the organization may not practice those values. The bigger the company, the more an expressed set of values is needed but the harder it is to ensure that everyone buys in.
This has been an incredible discussion, and my experience having exchanged comments and spoken by phone with Mark Clay and some of the people who worked for or knew SouthStar Funding has given me every reason to feel that the company had as many honest and ethical people as any other.
The blanket condemnation by a few folks in this thread is adolescent and unworthy of a response.
Thanks
August 5th, 2007 at 1:05 am
I was an u/w at Southstar & was there till the very end. I just recently saw a posting on the other website that the owner of southstar is back in business with Bayrock mortgage. Is this true?
August 5th, 2007 at 6:02 am
One of them who’s initials are MF, works there in a high position along with many other names (from both sales and admin) that you would instantly recognize. I have no idea as to his equity position in that company, if any, but go to their website and look at their products. I’m sure you will see a few familiar things.
Regards,
Mark
August 9th, 2007 at 11:29 am
I wonder if Bayrock will go under. Their programs are very similar to SSF
August 14th, 2007 at 5:55 pm
This discussion doesn´t sound at all like the SouthStar Funding I worked for. The SouthStar I worked for:
Would throw away good appraisal reviews that didn´t agree with a bad appraisal and keep bad appraisal reviews that agreed with a bad appraisal.
Had a Secondary Dept. that cared more about pushing NINA´s SISA´s and other useless loan products with stupid anacronyms and a repurchase resolution dept. that wasn´t competent enough to resolve the huge amount of repurchases that all of those products accumilated.
Would discard a borrower´s tax returns that didn´t show enough income and switch the program for the loan to “stated” to approve the loan.
Would tell a broker, “Well, it´s a stated income loan but a new debt showed up on the borrower´s credit report and now his DTI is too high. Do you think the borrower could “state” more income?”.
Had underwriters that would think they were sooo clever because they approved a loan that was “bad” but no one would ever know (after all, their bonuses were based on the amount of loans they approved, not how many they declined).
Would hire A/E´s who could never understand that their employer was SouthStar and not the broker. Therefore they would never look after SouthStar´s best interests.
Would incessantly remind their employees that they were provided with month-end lunches and a company paid trip (especially when an employee had to leave work at 5pm for a reason such as picking a child up at daycare or some other “stupid” reason like that).
Would provide a company trip so you could spend more time with the same people that you already spent most of your waking hours with anyway. For most employees, it was too expensive to bring their spouse ($1K+ for basically two full days) or hire a baby sitter for the long weekend. The company trips never were family oriented, unless your only family was SouthStar.
Oh yeah, it´s really a little humorous that you guys blame Wall St. for SouthStar closing. SouthStar did it to themselves. Wall St. has always been a bunch of SOB´s ever since they screwed the subprime companies back in 1997. There´s no sense getting mad at Wall St. for putting a subprime company out of business just like there´s no sense getting mad at a dog pissing on a fire hydrant….they´re just doing what comes naturally. SouthStar should´ve been minding the store better, like the subprime companies that are still in business.
Someone mentioned that SouthStar looked like a “pork chop” to the Wall St. companies. I suspect that SouthStar actually looked more like a floater in a toliet bowl and Wall St. realized they better grab what they could before it sank. After all, SouthStar didn´t accumilate $30MM (I believe I recall reading that amount somewhere?) in repurchases requests in one month and they were probably in default contractually. Considering the shaky ground SouthStar obviously was on, it sounds like the Wall St. made the right business decision.
SouthStar was the most hypocritical company I have ever been associated with. They claimed, they yelled, they screamed “we´re different…..we love our employees…..our brokers are our partners”. What a load of crap! Of the 100+ companies that have gone under this year, none have deserved it more than SouthStar Funding, LLC.
Oh yeah, as far as people who post on here staying anonymous, we all know most SouthStar employees..ummm…ex-employees…can´t handle critism like adults. You can go over to the Implode-o-Meter website and see what happens when their cult/former employer is critized.
SouthStar, It´s Always Personal
August 14th, 2007 at 7:16 pm
Let me guess…you were fired long before SouthStar went out of business, right? Typical hateful garbage from a bitter ex-underwriter that couldn’t meet SouthStar’s standards for customer service, work ethic, professionalism, etc..
The SouthStar you worked for wouldn’t tolerate your arrogant, ivory tower mentality and condescending attitude toward the clients that covered your paychecks. The SouthStar you worked for actually used its brain and approved deals that made sense in reality even though you did your best to find the loophole that would let you justify killing a deal. You’re like leftover chinese food, Stevie–definitely “in the box”. If Kirk Smith started another company tomorrow, hundreds of people would leave their job in a heartbeat for the opportunity to work for a man of compassion and character like that.
I have one piece of advice for people such as yourself–a challenging and rewarding career in the janitorial services industry.
Mark
August 21st, 2007 at 3:07 pm
Mark,
Good blog here - and long, too.
Give me a call, I’ve left you a VM, let’s talk when you can.
2 items:
* the first is by referral as you know…
* the 2nd is for a spot on our Radion show - the Realty Report. I’d like to have a segment on the shake-up esp. with First Magnus and CW in the news of late; could use your insider opinion.
Best to you!
TM
August 22nd, 2007 at 2:03 pm
[...] Ah, the final question. You should know who is messing around in your sandbox. Is the client working with a friend or family member, perhaps someone part-time or new to the business? As business slows, recently minted loan officers have scurried back to their day jobs while still trying to grab a loan here and there. Part-time lenders cannot possibly stay current on the important changes that are rapidly occurring in the industry. You don’t want to be in a transaction with that person. [...]
August 24th, 2007 at 2:06 pm
Wow this was all interesting to a lay person. I currently have a contract to purchase, pending on a property that was financed by South Star. The propery was forclosed on. Now we have been waiting a month for a decision from the “bank” to accept our offer. Does anyone know who SouthStar sold their loans to? I can’t get a straight answer from the selling agent and want to follow up on this myself. Any help is appreciated.
August 24th, 2007 at 3:05 pm
Hey Debbie, your agent (or the listing agent) should be able & willing to tell you who the bank is that they are dealing with.
If you get no response there, you can check with the title company and pull a property profile. The “chain of title” should be evident there.
I’m sure SouthStar sold loans to multiple investors and they in turn may have done the same. Chasing the rabbit down that hole will take you the long way to the answer.
Good luck and thanks for stopping by!
July 7th, 2008 at 8:13 am
I was an employee of Greenpoint Mortgage Funding for years until they imploded. I remember when I received the e-mail from SouthStar - I had never worked for them but I learned from my bosses at Greenpoint that they were a good company and a worthy competitor. I am trying to stay in the mortgage business as a processor, but I find myself hopping from job to job because most brokers are looking for a processor who will work for commission only (which is illegal in the state of Ohio, where I am located). Good luck to the folks from SouthStar, and I agree that some of this blame must fall on the consumer.
May 7th, 2009 at 2:32 pm
Mark Clay, it was you and people like you that not only put SouthStar out of business but also contributed to the decline in the housing market. Reading through your comments again, over two years after SouthStar filed bankruptcy, just reaffirms to me how predatory SouthStar was in their business pratices. I hope that you are no longer in the mortgage business or anywhere else that requires ethical behavior.
May 7th, 2009 at 3:01 pm
Dude, that’s harsh and contradicts a lot of comments from people who knew Mark and the company. If you don’t want to be written off as a flamer, why not just tell us who you are and why you feel the way you do.
And what do mean exactly by “people like you?”
May 7th, 2009 at 4:08 pm
Marc, it sounds like you are just as bad a person as Mark Clay. If you would bother to read the post above where I criticized his precious SouthStar and his response to it 8/14/07, you would see who the real “flamer” is.
For people like Mark Clay, an underwriter who followed guidelines (or as he put it stayed in the box) was considered bad. Hmmmmmm……I guess that really wasn’t the case after all seeing how everything turned out.
This “Mark Clay” character is a perfect example of an over-zealous account executive who pushed loans through the system without regard to the “box” (aka guidelines).
May 7th, 2009 at 6:04 pm
I read your previous rant. A rational person would not confine that critique to the people at Southstar. Taking fees and passing off the risk was a game. Everybody partied in a broad celebration of the innovation and creativity of the “free market”.
Buyers took the loans and speculated, lenders took fees and liberties with the facts, the secondary market took a slice and servicing revenue and pawned the crap off to a willing Wall Street who gave it a triple A kiss and a hug and and sold to unsuspecting foreign investors.
And you are the innocent in all of this? Perhaps you are, but you’ve sure been grinding that Southstar ax a long time now. It’s easy and cowardly to take pot shots from behind the bushes. Step out and let the others who knew you back then comment on your actions.