American Freedom Mortgage, Inc. (AFM) was a

private Private or privates may refer to: Music * " In Private", by Dusty Springfield from the 1990 album ''Reputation'' * Private (band), a Denmark-based band * "Private" (Ryōko Hirosue song), from the 1999 album ''Private'', written and also recorde ...

S Corporation An S corporation, for United States federal income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal ...

incorporated on February 2, 2001, according to the Georgia Secretary of State, and headquartered in Marietta, Georgia. AFM conducted business as a multi-state direct-to- consumer correspondent lender and mortgage broker specializing in the origination of

subprime In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people in the United States who may have difficulty maintaining the repayment schedule. Historically, subpri ...

and Alt-A mortgage loans. AFM also operated a wholesale mortgage lending division that originated loans via approved mortgage brokers and which used the fictitious name AFMI Funding. As a correspondent lender, AFM sold the mortgage loans on the open market to larger investors. According to an article in '' The Wall Street Journal'', AFM originated loans for a fee, then sold them to investors such as HSBC Mortgage Services, Inc. and mortgage-finance company

Countrywide Financial Corporation Bank of America Home Loans is the mortgage unit of Bank of America. In 2008, Bank of America purchased the failing Countrywide Financial for $4.1 billion. In 2006, Countrywide financed 20% of all mortgages in the United States, at a value of abou ...

. The

CEO A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especially ...

of AFM was

Tamara Burch __NOTOC__ Tamara may refer to: People * Tamara (name), including a list of people with this name * Tamara (Spanish singer) (born 1984) * Tamara, stage name of Spanish singer Yurena (born 1969) * Tamara, stage name of Macedonian singer Tamara Tod ...

and the COO was DeeAnn Myers. Prior to co-founding AFM, both Burch and Myers were loan originators with St. Louis, Missouri-based

American Equity Mortgage American(s) may refer to: * American, something of, from, or related to the United States of America, commonly known as the "United States" or "America" ** Americans, citizens and nationals of the United States of America ** American ancestry, pe ...

, Inc., a leading subprime mortgage lender. On January 30, 2007, AFM and Burch both filed voluntary "no asset"

Chapter 7 Chapter 7 may refer to: Albums * ''Chapter Seven'' (album), a 2013 album by Damien Leith. *''Chapter VII'', a 1973 album by drummer Buddy Miles George Allen "Buddy" Miles Jr. (September 5, 1947February 26, 2008) was an American composer, drum ...

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor ...

petitions in the United States Bankruptcy Court for the Northern District of Georgia. Both the AFM and Burch bankruptcy cases were subsequently converted to "asset" cases by the

Bankruptcy Trustee A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate. Canada In Canada, a licensed insolvency trustee (LIT) is an individual or a corporation licensed by the official superintendent to hol ...

after assets for distribution to unsecured creditors were discovered. The AFM bankruptcy case was assigned Case No. 07-61304-jem.

Subprime and Alt-A mortgage lending activities

At the beginning of 2006, AFM was a leading

and Alt-A mortgage correspondent lender and mortgage broker in the United States. Subprime mortgage loans are riskier loans in that they are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history. Subprime borrowers are generally defined as individuals with limited income or having FICO

credit score A credit score is a numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bu ...

s below 620 on a scale that ranges from 300 to 850. Subprime mortgage loans have a much higher rate of

default Default may refer to: Law * Default (law), the failure to do something required by law ** Default (finance), failure to satisfy the terms of a loan obligation or failure to pay back a loan ** Default judgment, a binding judgment in favor of ei ...

than prime mortgage loans and are priced based on the risk assumed by the lender. Alt-A loans are generally prime (i.e., FICO credit scores of 680 or higher) or near-prime (i.e., FICO credit scores from 620 - 679) loans with some form of reduced documentation requirements (e.g., " stated income", "stated assets", "no income verification"). Although most home loans do not fall into this category, subprime mortgages proliferated in the early 2000s. Subprime mortgages totaled US$600 billion in 2006, accounting for about one-fifth of the U.S. home loan market.

Subprime mortgage crisis and bankruptcy

As with many subprime mortgage lenders, AFM experienced financial difficulties in 2006 due to repurchase demands from investors and diminished funding capacity because of an increase in non-performing loans. In August 2006, AFM held an auction at its corporate

headquarters Headquarters (commonly referred to as HQ) denotes the location where most, if not all, of the important functions of an organization are coordinated. In the United States, the corporate headquarters represents the entity at the center or the to ...

to sell its assets. In February 2007, HSBC Mortgage Services, Inc. commenced litigation against AFM in the Northern District of Illinois based on assigned loans that resulted in early payment defaults, a repurchase event pursuant to the governing loan purchase agreement.HSBC Mortgage Services Inc. v. American Freedom Mortgage, Inc.
Court documents indicate

was also demanding repurchase of some loans it purchased from AFM. In March 2007, '' The Wall Street Journal'' reported many lenders, including HSBC Mortgage Services and Countrywide, were demanding AFM repurchase loans pursuant to repurchase provisions contained in loan purchase agreements. AFM's financial difficulties were exacerbated by advertising commitments that exceeded the company's ability to meet. David Hal Burch, Tamara Burch's husband, was the director of marketing for AFM and responsible for AFM's advertising campaigns.

References

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External links

Example of television ads

American Freedom Mortgage, Inc. listed as #21 on the Imploded Lender List
Financial services companies established in 2001 Financial services companies disestablished in 2007 Companies based in Cobb County, Georgia Defunct companies based in Georgia (U.S. state) Companies that filed for Chapter 7 bankruptcy in 2007 Companies that have filed for Chapter 7 bankruptcy 2001 establishments in Georgia (U.S. state) 2007 disestablishments in Georgia (U.S. state)

Subprime and Alt-A mortgage lending activities

Subprime mortgage crisis and bankruptcy

See also

References

External links