The Asian crisis has come home to roost in Utah, according to officials with FirstPlus Financial Group, who said 420 employees were laid off in its Utah FirstPlus Freedom operations on Thursday.
The cuts come as the company dismissed about 3,000 workers, or about half of its 6,250 employees, in operations nationwide. At the West Valley call center where most of the 420 employees work, they were informed of the layoffs as they showed up at work Thursday morning.FirstPlus Financial Group, a struggling home-equity lender, purchased Utah-based Freedom Mortgage in January. Since that time, a call center at 2500 South Lake Park Blvd. has employed about 1,250 people, according to a Dallas-based company spokesman.
The company also operates a handful of retail mortgage centers in the Salt Lake area, but employees at those centers will not be affected.
"This is a really big division for us," a company spokesman said.
At the time of its merger, Freedom Mortgage had a 12-year history in Utah and continued to offer traditional mortgage loans as well as FirstPlus' products. The company has specialized in loans of up to 125 percent of the home's value, the spokesman said.
On Thursday, the company announced the layoffs as well as a "strategic alliance" that will allow the company to stay afloat. The company said it will sell assets for about $130 million. It plans to sell its consumer-loan servicing operations to Superior Bank, an affiliate of Coast-to-Coast Financial Corp. for $75 million.
FirstPlus said its planned layoffs would save about $85 million a year.
FirstPlus' action - taken after the company failed to find a buyer - reflects a crisis in the home-equity lending business, particularly among companies that make loans that exceed the equity a borrower has. One company, Southern Pacific Funding Corp., recently filed for bankruptcy; two others have announced they are for sale and another has indicated liquidity problems.
Problems stem from the recent global crisis and the instability of a major hedge fund for wealthy investors. Investors have been scurrying from more risky securities into U.S. Treasuries. FirstPlus and the other companies repackage mortgage loans into what are called asset-backed securities, but the market for these bonds has plunged into turmoil, the Washington Post reported.
In recent months, FirstPlus has struggled to finance its operations. Earlier this week, Life Financial Corp., a bank holding company in Riverside, Calif., backed out of a deal to purchase FirstPlus.