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'A Tough, Horrible Day For Everybody' At FGMC

David Krechevsky
Jun 28, 2022
FGMC Logo

First Guaranty Mortgage Corp laid off more than 400 during online meeting.

Updated at 2 p.m. EDT:

Stop me if you’ve heard this one. 

The CEO of a mortgage industry company holds a virtual meeting with hundreds of employees and, within 10 minutes, all of the employees — more than 400 — are summarily terminated. 

Some of the employees suspected what was coming because when they received their paycheck stubs the day before, they discovered they had received a lump-sum payment of their remaining paid time off. When supervisors inquired with Human Resources about it, they were told it was just a glitch.

As much as this sounds like the poorly handled layoff last December at Better.com, it is instead what happened last week at First Guaranty Mortgage Corp. (FGMC), as described by former employees. As one former employee put it, it was "a tough, horrible day for everybody."

The FGMC debacle also raises questions about whether the company properly followed the federal Worker Adjustment and Retraining Notification Act, which requires 60-days notice of a mass layoff, while also leaving unanswered questions about whether the loans in its pipeline — including rate-locked loans — will ever be funded.

No Severance Offered During Meeting

This horror story began on Friday, June 24, when more than 400 FGMC employees — ranging from senior vice presidents to sales personnel – were terminated during a 10-minute virtual meeting with CEO Aaron Samples held via Microsoft Teams. According to the former employees, who spoke with National Mortgage Professional on the condition they would not be identified, those terminated were notified of the meeting less than hour before it was held at 11:30 a.m. EDT.

Each of the former employees, who spoke separately with NMP, provided essentially identical details about how the layoff was handled, and about the financial state of the company — which they say had changed dramatically in the weeks before the layoff.

While FGMC’s headquarters is located in Plano, Texas, it has employees in all four time zones, which meant the meeting announcement sent just an hour ahead of time arrived early in the morning for those in the Mountain and Pacific time zones.

During the virtual meeting, Samples cited several general economic hurdles the company faced, including market compression and geopolitical issues, before announcing that everyone on the call was being terminated immediately, the former employees said.

They said that while the terminated employees received the lump sum for their paid time off, Samples offered no severance package, and said FGMC would extend medical and dental benefits only through the end of the month — just six days from the date of the Teams meeting.

Senior executives also did not receive their quarterly bonuses, and it was not known whether sales staff would receive their commissions, which typically are paid on the 15th of each month, the employees said.

In a statement emailed to NMP this afternoon, a spokesman disputed some of the former employees' statements.

"We want to clarify that we have paid salaries, accrued PTO, and commissions that have come due and are in the process of making severance payments to those who are eligible," the spokesman said.

The former employees said nearly 500 staff members participated in the virtual meeting. One former employee said a count of names attending the meeting totaled 487, which included the CEO. 

FGMC, however, filed a WARN Act notice with the Texas Workforce Commission (TWC) on Friday — the same day as the mass layoff — stating the layoffs in Plano would total 428, according to the TWC website. It is likely the number of layoffs was higher, though, since employees who work outside of Texas also participated in the meeting. 

The federal Worker Adjustment and Retraining Notification (WARN) Act of 1988 requires businesses that employ more than 100 workers to provide affected employees “60 days’ notice in writing” of a mass layoff or plant closing, or to pay the employees if they fail to give notice. The former FGMC employees said terminated employees received a WARN Act notification letter following the meeting. While the state was notified on June 24, it did not receive the notice until Monday, June 27.

NMP submitted several questions to the Texas Workforce Commission regarding the WARN Act and FGMC, but a spokeswoman replied by stating she would provide answers by "the end of the day" today.

Signs Of Trouble

While the layoffs were a shock to most who were terminated, the former employees said there were earlier signs that FGMC was in trouble. They all pointed first to PIMCO, a California-based investment management firm that acquired a significant stake in FGMC in 2015.

PIMCO, however, withdrew its financial support in March, the former employees said, adding that a search for another investor was unsuccessful.

That is confirmed by the WARN Act notice that was both emailed and sent via the U.S. Postal Service to the terminated employees. The notice, which was shared with NMP, is signed by Cassie Vacante, the company’s SVP of Human Resources.

The notice states that FGMC “has experienced significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility.”

It continues, "These circumstances require the immediate reduction of FGMC’s workforce and layoff of many of its employees. In addition, FGMC’s recent efforts to obtain funding that could have prevented this layoff have proven unsuccessful.”

Former employees say the company was negotiating with PLACE, a fintech company that in November 2021 announced it had “raised a $100 million Series A round, led by the growth equity business within Goldman Sachs Asset Management with participation from 3L Capital for a valuation of more than $1 billion.”

According to the company’s website, PLACE provides software solutions and business services that include administrative support, marketing and branding, lead generation, accounting, legal, Human Resources, back-office infrastructure, and training for all positions. It supports and partners with agents and teams operating in over 100 markets across the U.S. and Canada.

PLACE did not immediately reply to an email requesting comment.

Former employees also said that mortgage applications at FGMC were down over the past three weeks, in part because its interest rates were not competitive. Other lines of revenue also had fallen off, and during Friday’s meeting employees were told that no more loan applications would be accepted.

The former employees expressed concern that Samples said nothing about whether mortgages in the company’s pipeline would be fully funded, leaving its staff loan originators, third-party originators, and borrowers in the dark. The employees said they had received calls from customers and could not provide answers to their questions about the status of loans that were locked in.

One other sign of what was coming came Thursday, June 26, when FGMC closed its Plano headquarters and told the employees to work remotely. Following the meeting on Friday, computer access for remote employees was cut off, they said.

The former employees all agreed that the company is likely to close permanently, both because of its financial difficulties and because of the damage it has done to its reputation by handling the layoff so badly.

In the statement emailed to NMP, FGMC said it is "continuing to fund loans and engage actively with its consumers."

The company added, "We are working closely with our financial stakeholders to navigate this challenging moment.”

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