Fieldstone bankruptcy plan OK'd by judge

Columbia subprime lender to reorganize

July 11, 2008|By Tricia Bishop | Tricia Bishop,Sun reporter

A Baltimore bankruptcy judge said yesterday that he would confirm a reorganization plan for Columbia's Fieldstone Mortgage Co. as early as today, making it one of few subprime lenders to survive bankruptcy since the credit crisis began.

Fieldstone filed for Chapter 11 protection in November, having already shuttered operations and whittled its work force to 25 from 1,000. Most of the remaining employees will join the reorganized business, now funded and run by Planet Financial Group LLC, which court documents describe as a Delaware "holding company for financial assets and operating entities."

Neither Planet's chief executive nor its attorney returned calls for comment.

Fieldstone's chances of continued survival are murky, however, mortgage industry analysts said.

"They've emerged from bankruptcy only to perhaps find the most difficult operating environment maybe ever, but certainly of the last 25 years," said Keith T. Gumbinger, a vice president at HSH Associates, a financial publisher.

Fieldstone was once ranked among the country's top 20 subprime lenders, originating $5.5 billion in loans in 2006. Such loans are made to people with compromised credit.

But the ailing housing market and ballooning monthly mortgage payments led to a surge in loan defaults.

Dozens of lenders have gone out of business and into bankruptcy. Most end up liquidating the few assets they have to pay their debts and have nothing left to reorganize.

"There's usually not a lot of tangible assets," said John Bancroft, executive editor of Bethesda-based trade newsletter Inside Mortgage Finance. Many firms were just pass-through operations, quickly selling the loans they had made.

Fieldstone's attorney, Baltimore-based Joel I. Sher, said the company had a loan technology system that made it a better investment than most.

The company is already hiring, posting positions on online job sites, with the contact listed as Teresa McDermott. She was Fieldstone's chief financial officer and will keep that role in the reorganized company. During a hearing to confirm its reorganization plan yesterday, McDermott sat patiently, as she has at many recent court proceedings. She acknowledged that the past year has been full of "very difficult times."

Among them was the shocking death of a colleague. In January, police say Executive Vice President Walter P. Buczynski killed his wife and committed suicide. Many staffers had considered him a friend.

Chief Information Officer John Camp will stay on at Fieldstone, though chief executive Michael J. Sonnenfeld has resigned. Planet Financial CEO Dennis Neubert will become Fieldstone's chief executive when the transaction closes, expected this month.

"There's so much turmoil in the industry," Sonnenfeld said yesterday. For Planet Financial to keep "the core of the infrastructure intact and retain some jobs is really a very positive outcome."

Sonnenfeld founded the company in 1995, taking it public 10 years later amid a housing bubble, when home sales peaked. When Fieldstone filed for bankruptcy, it had $121 million in liabilities, but just $15 million in assets, court records showed.

U.S. Bankruptcy Judge James F. Schneider commended Sonnenfeld for his personal expenditures of time and money during the bankruptcy process, as well as the other dedicated and remaining employees.

"Without their help and conscientious service, this day would not have happened," he said. "This has not been an easy case."

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