CoreStar Financial Group is shuttering its Timonium offices and transferring client loans to other mortgage companies, an apparent casualty of the lending industry, which is increasingly losing businesses to the housing-market slump.
CoreStar, which specializes in home loans to those with "less than perfect" credit, is liquidating its assets and has surrendered its mortgage lender's license effective April 1, Maryland Department of Labor and Licensing officials said yesterday.
It's unclear whether CoreStar, which had already closed a Columbia office, fell on hard times or its owners simply decided to move on. "They didn't give a reason," said Charles W. Turnbaugh, commissioner of financial regulation. "This little bit of information that I have suggest that they are winding up their business in an orderly fashion and transferring customers. You know, companies come and go, and that's the American way."
Calls to CoreStar were unreturned this week, and a letter it sent to the licensing department simply says the company "voluntarily surrenders" its license. State officials did not know how many people work for the company, which also has offices in Pennsylvania, North Carolina and Ohio, according to its Web site.
At the Timonium headquarters Thursday, the main offices were dark, though a handful of employees worked from a back- room, sorting through files. An accountant who declined to give his name said CoreStar was open for business "for now," though he confirmed that people had been laid off.
"With the real estate market slowing down ... some people are not going to be able to make it and close up and get out of the industry, and some people will be able to survive," said Charles DiPino, president of the Maryland Association of Mortgage Brokers. He had heard talk that CoreStar was on its way out, but he wasn't sure until yesterday.
"If there's less consumer refinancing and less consumer buying and more houses on the market, it means less mortgage companies that are going to be able to stay in business," DiPino said.
"You're going to find a lot of people in Maryland and Virginia are going to turn their licenses in because there's less business out there," DiPino said.
While the housing market slowdown has affected mortgage lenders across the board, those concentrating in "subprime" loans to people with poor credit have been hard hit, leading state regulators to worry that customer contracts won't be honored.
The parent company of national lender Ameriquest this week announced plans to close several call centers and lay off employees amid the challenging non-prime market.
"Only companies with the ability to control costs and improve loan quality are going to be successful," Ameriquest said in a statement.
This week, the Maryland labor and licensing department sent six "cease-and-desist" orders - demanding that existing loans be honored and no new applications accepted - to affiliates of New Century Financial Corp., the second-largest subprime lender. The company is facing federal investigation and bankruptcy and its own lenders have cut off funding because of delinquent payments.
On Tuesday, Massachusetts, New Hampshire, New Jersey and New York sent similar letters to New Century affiliates.
"We need to take action to protect consumers," said Linda Sherman, a spokeswoman for the state agency. Her office said CoreStar is not among the defaulters and that no complaints have been lodged against the company.
"They have a decent reputation," said Glenn Schwartz, president and owner of Vision Capital, a wholesale mortgage lender based in Rockville.
Schwartz has taken on 12 of CoreStar's employees in the past week. "They called us looking for a home, and we are in business this week, so we took them."
Schwartz says his company is faring well, though he still worries about the industry.
"This is not necessarily just a subprime thing, it's going to be a lot deeper," Schwartz said. "This is going to be very difficult with the whole housing market around here."