Broker expected to file for bankruptcy protection

After a five-year growth spurt in which it says it wrote $2 billion in home loans, Kirkland-based Merit Financial terminated most of its 300 or so employees Thursday in an attempt to reorganize just ahead of filing for bankruptcy protection.

"What remains unknown is how the company will be in the future," said Ryan Kidd, Merit's chief financial officer and company spokesman. "We'll try our best to regroup and move forward."

Meanwhile, Kidd said a "skeleton crew" will continue to process loan applications and take new ones. Remaining employees are completing loans that have been started.

"We paid for all the marketing," said Vice President of Marketing Justin Andrews. "We have to do something. Right now we're trying to salvage what we have in deals and do what we can to keep going."

Founded in 2001 by former University of Washington football player Scott Greenlaw, Merit grew from a dozen employees to become one of the largest mortgage brokers in the state.

It also offered debt-consolidation services, credit education and reverse mortgages to seniors. It actively solicited loan officers, soon amassing a stable of young up-and-comers who earned six-figure salaries.

About 95 percent of the firm's business consisted of refinances, Kidd said, a market segment particularly hard hit by the recent rise in mortgage-interest rates.

Help for consumers


Here is some advice for consumers caught in the middle when questions arise about the stability of their financial-services company:

Get on the phone and find out where your loan application is in the process.

Find out whether title reports, appraisals and other reports have been ordered and whether key points in the timeline are being met. Ask who is in charge, who is handling your file and whether that person is capable of handling the workload.

If you have trouble getting answers or don't like the ones you get, shop around for a new lender. You may have to pay some costs (appraisal, credit check, etc.) again.

Once you find a new lender, inform the current broker in writing that you want your filed transferred to the new company. Keep copies.

Consumers can file a complaint against a mortgage broker with the state Department of Financial Institutions: www.dfi.wa.gov or 877-746-4334.

Source: Department of Financial Institutions, Washington Association of Mortgage Brokers, Morgan Mortgage

Jolayne Houtz

Kidd estimated that as much as 45 percent of that business dried up in the past nine months, which apparently caught company leaders by surprise.

"The thought process was the refinance market would always be there," Kidd said. "It was a very lucrative market."

Six months ago, Merit stopped making loans itself and instead brokered loans between customers and lenders.

Kidd also cited "a series of missteps" for the company's woes but declined to elaborate. He said the company is insolvent and owes money to more than 50 vendors, two national banks and various equipment-leasing companies.

"It is my expectation we will file for bankruptcy protection," he said.

Since 2001, there have been 31 complaints against the company filed with state agencies and the Better Business Bureau. Some were related to customer service, others to sales practices or contract issues.

Merit executives will meet with officials from the Washington state Department of Financial Institutions today. The department is most interested in whether consumers' money has been safeguarded, department spokesman Chuck Cross said.

The company's terminated employees received no severance, Kidd said. He expects many to form another mortgage company.

"I would expect it to look very much like Merit did," he said.

Staff reporters Jolayne Houtz and Lisa Chiu contributed to this report.

Elizabeth Rhodes: erhodes@seattletimes.com