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Troubles in the mortgage industry have hit home in Blount County, but two local businessmen are stepping up to protect local customers.
A failed financial services company based in Florida with two offices in Maryville has caused a nightmare for some elderly homeowners and forced both local offices to drop affiliation with TransLand Financial Services.
In August, three publicly traded commercial lenders — Tier One Bank, Federal Trust Bank and MidCounty Bank — took control of many loans issued by TransLand and tried to force TransLand into involuntary bankruptcy after the company fell behind on its payments.
TransLand, based just north of Orlando, Fla., operated what it calls a net branch office on Morganton Square Drive and a corporate office specializing in reverse mortgages on Summerfield Drive in Maryville. The reverse mortgage office closed Sept. 7 and the net branch office in Morganton Square, while open, is quickly changing its affiliation to another financial institution.
When the court assigned an investigator and started legal proceedings, many aspects of the day-to-day financial operations of TransLand were placed on hold by the courts.
TransLand specialized in construction loans and reverse mortgages. While the three large banks administered the company’s construction loans, many customers of TransLand’s reverse mortgage operations were thrown into a precarious and risky financial situation.
Nearly 100 loans, including at least eight in Blount County, were placed in limbo for nearly three months and 16 mortgages that actually closed on or around Aug. 27 sat unfunded with no money backing them for weeks. Although homeowners processed the mortgages at legitimate title offices, the mortgages were worthless.
Last week, TransLand announced that the reverse mortgages which had been in jeopardy would be funded by another bank, but not before many customers had been victimized by the situation.
“People were being hurt by what they did,” said John Smaldone, TransLand’s former vice president and director of the reverse mortgage center in Maryville.
“I have customers who are 70 and 80 years old who were getting ready to be put out of their homes.
“What they’re doing now is still hurting customers and employees — and they had a way to get out of it three weeks ago, but they wouldn’t do it.”
Smaldone said that while many of the reverse mortgages were in limbo, he personally knew customers of TransLand Financial Services who were within days of losing their homes and other homeowners who were dropped by their homeowners’ insurance companies.
Russ Peterson owns and operates the TransLand Office in Morganton Square and is in the process of severing ties with TransLand because of its financial woes.
“We’ve taken steps to ensure that whatever happens with TransLand has no impact whatsoever on our customers,” Peterson said.
“Recent events caused us to question TransLand’s ability to operate and fund loans in a manner that meets the standards we require as a mortgage originator.
“To continue providing our customers with a full offering of loan products, competitive rates, and outstanding service, we decided to secure an alternate source of funding with a nationally recognized firm other than TransLand.
“This change will take effect Oct. 1 — allowing time to complete licensing requirements.
“Support given by this community and our clients over the past year and a half allowed us to grow. We look forward to continuing that growth through the coming years with our dedication to outstanding service and our new affiliate.”
Smaldone will also open his offices again — on or around Oct. 1 — with a new funding partner and no ties to TransLand Financial Services.
When contacted by The Daily Times, TransLand’s spokeswoman Ginger Allen said, “Those three publicly traded banks came in and played bully. They held up business for us and for the people who needed our reverse mortgages.
“We will reorganize our branches and will move forward with our business. Like everyone in the mortgage industry, our loans have been impacted by banks that won’t release funds — money is simply tighter now.”
Allen said TransLand has “scaled back” its operations. While it once employed 196 people and held licenses in 39 states, it now operates in just seven states, including Tennessee. The overall number of corporate TransLand offices dropped from around 100 to just ten.
The few employees who stayed with TransLand were surprised on Friday morning when TransLand executive Dave Farr sent an e-mail message informing branch offices that employees who leave the company will not be paid commissions on loans they processed (a change in the company’s longstanding policy which, according to the e-mail, had been implemented last week). Later, the company said it was retracting the email, but no official notice was sent to the branch offices that originally received the notice.
Smaldone said the news about commissions for employees was disturbing, and believes the company will try to blame the policy change on the courts.
“The people who stayed with them and tried to keep business going for TransLand through its hard times look like they are going to be punished too,” Smaldone said.
“It’s just not right to treat people this way — and it didn’t have to happen.”