On Q Financial: Celebrity Home Loans' Furloughs, Layoffs Sank Deal
Spokesman for Phoenix-based IMB said it was not aware of financial issues until after acquisition deal was announced.
Celebrity Home Loans employees were shocked to be told by company officials they were being furloughed last week, and then laid off this week, due to financial problems.
That news also shocked On Q Financial Inc.
A spokesman for the Phoenix-based independent mortgage bank told NMP Wednesday that his company had no idea about the seemingly sudden liquidity issues that led to the furloughs and, a week later, the mass layoff by Celebrity Home Loans on Monday, adding that On Q found out about the issues only after they occurred.
That is surprising, because the two companies held a conference call on Feb. 7 to announce that On Q Financial had reached a deal to acquire Celebrity Home Loans’ remaining production group. The terms of that deal were not disclosed.
“Celebrity made the decision to do furloughs, and then made the announcement about payroll,” said Pat Lamb, a spokesperson for On Q. “We found out about it later.”
According to former Celebrity Home Loans employees, the company held a conference call on Feb. 7 with all employees to announce a deal with On Q Financial Inc.
The former employees say, however, that it was not clear during that meeting whether On Q was acquiring Celebrity or announcing a merger of the two. The situation became even more confusing when company officials announced during the same conference call that about 75% of Celebrity’s staff were being furloughed at 5 p.m. that day, with no date set for being reinstated.
The former employee said no explanation was given for why the furloughs were necessary. A subsequent email stated that some employees were being furloughed immediately, while others would not be furloughed until Feb. 27.
Then came Monday’s email, which terminated the bulk of the remaining staff as of 5 p.m., and added that the company will be “unable to process our full payroll obligations on 2/16/2023. This means that you will not receive compensation during this pay period.”
Lamb said the announcement of the furloughs due to the company’s financial situation effectively killed the deal for On Q to acquire Celebrity’s remaining assets.
Despite the fact the companies were negotiating a deal, Lamb said that On Q “was not privy to the information about Celebrity’s cash position.”
In response to a question, Lamb stated that “nothing got missed in due diligence” during the negotiations for the acquisition, and that he “would not say” Celebrity Home Loans misrepresented its financial status to On Q.
The liquidity issues, he said, “relates to other parts of Celebrity’s business and holding company that I am not aware of.”
Lamb also said that On Q’s plan in making the acquisition was to retain a significant portion of Celebrity’s staff.
“We would not have had a home for 100% of their employees, but we would have hired as many as we could responsibly bring on,” he said.
On Q has interviewed many former employees of Celebrity Home Loans, though Lamb could not say how many had been hired nor how many had filled out job applications.
“Unfortunately, when the furlough news came out, and then subsequently the payroll news, all the employees were then out of work and trying to figure out what their next step is,” Lamb said. “We’re hiring as many Celebrity employees as we can convince to come on board, and we’re trying to work through that as quickly as we can.”
He said that while it is his understanding that Celebrity Home Loans is trying to close the loans remaining in its pipeline, “To the extent that there are clients that don’t have confidence that that will happen, we’re trying to help facilitate, taking files over if the borrower chooses to work with On Q, to restart their loans. We’re working with as many people as come to us.”
Lamb said On Q, founded in 2004, operates in 46 states and focuses on the distributed retail channel, though it also does have a correspondent channel. He said the company’s loan origination volume last year was about $2 billion.
He also noted that On Q is working on another acquisition. He declined to provide details, saying only that the deal is expected to be announced in April.