MOUNTLAKE TERRACE – Mortgage Investment Lending Associates Inc. was growing so fast two years ago it held a job fair to quickly fill about 300 new positions. The mortgage industry was booming, and so was the company, which specialized in subprime loans.
On Friday afternoon, the company’s meteoric rise came to an abrupt end with a short e-mail to employees from Layne Sapp, MILA’s founder and chief executive.
“It is with deep regret that due to ongoing negative market conditions MILA is forced to close its doors at the end of business today,” the e-mail read.
With that, all 300 of the company’s remaining employees were instantly out of work, and what had once been one of the county’s major employers was closed.
Employees laid off on Friday said they were told via e-mail and given only a few minutes to leave after confirming the news with their managers. Monday, the headquarters was quiet.
“It was a complete surprise,” said Rick Tilton, Northwest sales manager for CTX Mortgage Co. in Marysville. He’d worked with MILA’s loan products since 1989 and found out about the closure from one of its laid-off employees. “I was 100 percent shocked.”
For a time on Friday, the company announced the closure on its Web site, but that was taken down. Instead, brokers found Monday the Web site was down.
MILA, incorporated in 1989, was a lending wholesaler, providing the funds that mortgage originators loaned to homebuyers, then bundling those loans and selling them to Wall Street investors. It specialized in subprime loans, those made to borrowers who have problems qualifying for standard mortgages.
The company’s secret weapon was its automated online system that offered mortgage brokers and borrowers loan commitments within seconds, minutes or hours instead of days.
When the U.S. housing market boomed, MILA did as well. In 2003, Sapp bought an empty Safeco office building in Mountlake Terrace and made it the headquarters for his company of 350 people.
As the company added the number of states it served, its mortgage lending volume doubled from about $550 million in 2002 to well more than $1 billion the following year. At its peak in 2005, the company employed about 700 people and said it was handing several billions of dollars in loans. During this time, Sapp also bought one of Snohomish County’s biggest office buildings in Lynnwood, selling it two years later at a considerable profit.
Born in Everett, Sapp bought his first house when he was 18 and was a millionaire by his early 20s when he began dabbling in the mortgage industry.
He was by far MILA’s majority owner, known by employees for the luxurious Bentley he drove. He also bought a 130-foot yacht, which he’s been trying to sell for months.
Sapp, who didn’t return several calls from The Herald, and MILA both attracted considerable attention in their rise, winning recognition from the Better Business Bureau, being named one of the region’s entrepreneurs of the year by Ernst &Young and winning similar accolades from Inc. magazine. Last fall, the South Snohomish County Chamber of Commerce recognized the privately held company with a business excellence award.
As a wholesaler, MILA was in one of the most volatile parts of the mortgage industry, said Jason Bloom, co-founder of Elliott Bay Mortgage and vice president of the Washington Association of Mortgage Bankers.
The subprime sector has been rocked by a combination of falling home sales and property values in many parts of the country and questionable loan policies on the part of major U.S. lenders. New Century Financial, the nation’s second-largest subprime lender, has filed for bankruptcy, and at least 40 others have gone out of business nationwide. Regulators are now looking at clamping down on remaining lenders.
“There are a lot of reasons why this happened. Over the last seven years, there’s really been an explosion in the number of loan products on the market,” Bloom said. “There’s always an overexuberance when there are new products on the market.”
In other words, borrowers who probably shouldn’t have been approved for things like interest-only mortgages and similar loans did win approval. When the real estate market cooled in most parts of the nation, they found themselves in trouble. Default and foreclosure rates have risen nationally.
“You just have a combination of things happening that created a perfect storm environment,” Bloom said.
MILA’s troubles didn’t start overnight. In early 2006, the company trimmed its work force by about 120 people, and smaller groups of layoffs occurred over the next year. About the same time, the company tried to shift into offering prime and Alt-A mortgage products, considered less risky than subprime loans.
Former employee Mary Linares of Marysville, let go last year, said she was appalled at the nature of loans MILA was funding.
“We would see things that shouldn’t have been happening,” she said Monday. “When we pointed it out, instead of being grateful, they’d get mad at us.”
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
In a nutshell
Who: Mortgage Investment Lending Associates Inc.
Where: Mountlake Terrace
What: The wholesale mortgage lender, which dealt heavily in the subprime mortgage market, laid off all its 300 employees and closed its doors with little notice Friday. At its peak, the company employed about 700 people and handled billions of dollars in loans.
Why: Dozens of subprime lenders have closed their doors in recent months. The reason is that the loans were issued to people with poor credit who were the most vulnerable to not being able to pay their mortgage.
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