American Freedom Mortgage, Inc.
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American Freedom Mortgage, Inc. is a private direct to consumer subprime mortgage lender that was formed in 2001 and headquartered at 2211 Newmarket Parkway, Suite 130, Marietta, Georgia 30067. As of June 1, 2006, the CEO of American Freedom Mortgage, Inc. was Tamara Burch and the COO was Ann Myers. Ann Myers is currently the CEO of Skystone Mortgage Group, Inc. American Freedom Mortgage, Inc. also operated a wholesale mortgage lender division using the fictitious name AFMI Funding. American Freedom Mortgage, Inc. won The Consumers' Choice Award™ as the best "debt consolidator" in Atlanta, Georgia in 2004 and 2005. According to a Wall Street Journal article, American Freedom Mortgage, Inc. made "$10 million in revenue in 2005 by originating loans and taking a fee, before selling them on to investors such as HSBC Holdings PLC and mortgage-finance company Countrywide Financial Corporation."
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[edit] Subprime Mortgage Lending Activities
As of June 1, 2006, American Freedom Mortgage, Inc. was a leading subprime mortgage lender in the United States. Subprime mortgage loans are riskier loans in that they are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history. Subprime borrowers are generally defined as individuals with limited income or having FICO credit scores below 620 on a scale that ranges from 300 to 850. Subprime mortgage loans have a much higher rate of default than prime mortgage loans and are priced based on the risk assumed by the lender.
According to the 2001 Expanded Guidance for Subprime Lending Programs, a subprime mortgage refers to "... the credit characteristics of individual borrowers. Subprime borrowers typically have weakened credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, debt-to-income ratios, or other criteria that may encompass borrowers with incomplete credit histories. Subprime loans are loans to borrowers displaying one or more of these characteristics at the time of origination or purchase. Such loans have a higher risk of default than loans to prime borrowers. Generally, subprime borrowers will display a range of credit risk characteristics that may include one or more of the following:
- Two or more 30-day delinquencies in the last 12 months, or one or more 60-day delinquencies in the last 24 months;
- Judgment, foreclosure, repossession, or charge-off in the prior 24 months;
- Bankruptcy in the last 5 years;
- Relatively high default probability as evidenced by, for example, a credit bureau risk score (FICO) of 660 or below (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood; and/or
- Debt service-to-income ratio of 50% or greater, or otherwise limited ability to cover family living expenses after deducting total monthly debt-service requirements from monthly income."
About 21 percent of all mortgage originations from 2004 through 2006 were subprime, up from 9 percent from 1996 through 2004, says John Lonski, chief economist for Moody's Investors Service.
[edit] Financial Difficulties, Bankruptcy and Litigation
As with many subprime mortgage lenders, American Freedom Mortgage, Inc. experienced financial difficulties in 2006 and 2007 due to repurchase demands from investors and diminished funding capacity because of an increase in non-performing subprime loans.
On August 5, 2006, American Freedom Mortgage, Inc. held an auction at its corporate headquarters via Elrod Auction Co. in order to sell most of its assets. According to the published advertisement, the auction featured "over 50,000 sq.ft. of office furniture; 100's of desks, chairs, file cabinets, computers w/flat screen monitors, phone system with over 100 phones (Intectel Axxess), cubicals, conference tables (all sizes). All furniture is less than 3 years old some never been used."
On January 30, 2007, American Freedom Mortgage, Inc. and its CEO, Tamara Burch both filed for Chapter 7 Bankruptcy protection in the United States Bankruptcy Court for the Northern District of Georgia. According to an Atlanta Business Chronicle dated February 16, 2007, American Freedom Mortgage, Inc. "closed its doors because it advertised too much. The Atlanta-based mortgage lender filed for bankruptcy on Jan. 30 not just because of the softening home market. According to the company's attorney, Steve Sasine, the company accrued advertising bills that far outstripped its ability to pay. Company President Tamara Burch could not be reached for comment. Sasine said the advertising -- primarily television and radio ads -- was placed without Burch's knowledge. Bankruptcy documents filed by the company as of press time did not provide specifics of the advertising campaigns, nor did Sasine." David Burch, the husband of Tamara Burch, served as the Marketing Director of American Freedom Mortgage, Inc.
On March 13, 2007, the Wall Street Journal reported that many of the lenders have demanded that American Freedom Mortgage, Inc. repurchase loans pursuant to repurchase provisions contained in loan purchase agreements. The Wall Street Journal reported that lenders "led by HSBC Holdings PLC, banks and others are trying to force small mortgage lenders to buy back some of the same loans the banks eagerly bought in 2005 and 2006, by enforcing what the industry calls repurchase agreements. Squeezed by the onslaught of defaults, many originators are saying they can't afford to buy back their loans or are pursuing bankruptcy protection." The article further stated that "HSBC is dispatching lawyers to U.S. courts to try to collect from mortgage originators, fighting over often-small amounts in a myriad of cases. A few weeks ago, the British bank had a lawyer in Atlanta at the bankruptcy hearing of American Freedom, a mortgage seller that operated from an Atlanta suburb and advertised loans on its Web site called getfree.com. HSBC has demanded American Freedom buy back two loans totaling $255,000 because the borrowers didn't make initial payments. The first meeting for American Freedom creditors was held March 2 in the federal bankruptcy building in downtown Atlanta. American Freedom President Tamara Burch's lawyer, and Ms. Burch herself, who barely spoke above a whisper, both said American Freedom faced a slew of repurchase requests. An HSBC spokeswoman said the bank doesn't comment on pending litigation." Court documents indicate that Countrywide Financial Corporation is also demanding repurchase of some loans it purchased from American Freedom Mortgage, Inc.
According to Court documents, the Bankruptcy Meeting of Creditors was continued for production of additional documents or information to be produced on March 20, 2007. Court documents further indicate that, on March 20, 2007, the Bankruptcy Meeting of Creditors was again continued for production of additional documents or information to be produced on April 3, 2007.
[edit] Trivia
- According to public records, Ann Myers, the COO of American Freedom Mortgage, Inc., incorporated Skystone Mortgage Group, Inc. in March of 2006 and commenced business in July of 2006. Skystone Mortgage Group, Inc. announced on March 16, 2007 that the company had elected to cease accepting loan applications from prospective borrowers effective immediately.
- A band in Athens, Georgia is named The Tamara Burch Project and is named after the CEO of American Freedom Mortgage, Inc., Tamara Burch. According to its web site, the band was inspired by the late night television commericals featuring Tamara Burch. The Tamara Burch Project's eponymous album features the following tracks: 1. Summertime, 2. Shallow, 3. 8978, 4. Scotland's Yard, 5. Ode to Wurzburg, 6. Feed, 7. Commuter Boy, 8. Back, 9. With One Look from Your Eyes, 10. Slow, 11. Anywhere, 12. I Knew You, 13. Dynamite, 14. He Was in Love with the World, and 15. Sleep.
