Flagstar Bank is suing Hometown Lenders for $21 million, alleging that the mortgage brokerage defaulted on its loans.
In a lawsuit filed in Michigan Eastern District Court on Nov. 10, Troy, Michigan-based Flagstar alleged that Huntsville, Alabama-based Hometown breached its loan and security agreements and that Hometown CEO Billy Taylor Jr. “has defaulted under his guaranty" by holding pledged mortgage loans in a warehouse facility beyond a period that would be permissible.
More than $1.9 million of pledged mortgage loans were sitting on Flagstar's warehouse line past the appropriate time, and no less than $705,840 was owed in past due curtailments, according to court documents.
In November 2020, the two entities struck up a mortgage warehousing loan and security agreement. As part of the agreement, Flagstar agreed to lend Hometown up to $60 million to be used for loan originations and to fund certain mortgage loans. In August, however, Flagstar flagged multiple occasions of Hometown defaulting on its obligations.
Following several alleged attempts to contact Hometown and its CEO Taylor, Flagstar terminated the warehousing loan as well as made the $20 million it had loaned the broker “immediately due and payable.” The bank has continued to “suffer damages … interest, fees, and expenses have continued to accrue.”
Flagstar did not respond to Banking Dive’s request for comment.