Open Mortgage on Friday shut down its distributed retail channel and laid off more than two dozen employees. The divisional closure comes six months after the Texas-based lender changed ownership and nine months after it exited the reverse mortgage business. The company will focus on the third-party origination (TPO) space going forward.
Sources told HousingWire, anonymously out of fear of retaliation, that leadership announced the closure of its branches during an “all-hands” call on Friday. They received the invitation for the meeting 30 minutes in advance. CEO and president Christopher D’Auria confirmed the decision, saying it was not made “quickly or easily.”
“Earlier today, we announced to our team members that we have made the strategic decision to close the company’s distributed retail channel, effective immediately,” D’Auria wrote in a letter to counterparties that was reviewed by HousingWire.
“Those of you who have worked with us over the years have seen us operate in a profitable manner, and we will continue to do so with an increased focus on our TPO channel in advance of redeploying retail in the future,” he added.
D’Auria said in a statement to HousingWire that he personally acquired Open Mortgage in February 2024. Open was founded in 2003 by Scott and Tana Gordon.
Open, which laid off 25 loan officers with a monthly run rate of $5 million in production, will retain two retail employees to close out the division’s pipeline. After that, they will be laid off. Those employees were already notified and will be paid severance upon termination.
“Every single loan officer has been paid per their compensation agreement. We have no open complaints regarding compensation with any state regulator. Any claim to contrary would be flatly untrue,” D’Auria said. “For those affected by this closure, we are paying out their full commission on closed pipeline for applications received through August 9. Additionally, per confirmation with our CFO, all vendors have been paid current and in a timely manner.”
According to D’Auria, the retail division’s production accounted for less than 10% of the company’s overall production. The Nationwide Multistate Licensing System (NMLS) showed Open had seven LOs and 16 branches as of Monday morning.
Sources told HousingWire that Open’s decision to exit the distributed retail channel came as financial issues piled up. They mentioned the company losing some warehouse lines, leading to its failure to comply with agency covenants.
D’Auria said that the company “may have lost warehouse lines since prior to our acquisition as they were not operating in profitable manner.” However, according to D’Auria, $150 million in additional warehouse capacity was added since February 2023.
In fact, Open closed the warehouse line used for reverse mortgage since it exited this business in November 2023, after lower volumes combined with lower pull-through rates made its costs to close reverse loans too high.
In June, the U.S. Department of Housing and Urban Development (HUD) terminated the Federal Housing Administration (FHA) direct endorsement approval for Open in Iowa. Modex data shows that the state was responsible for only 3.2% of the company’s total volume in the last 12 months.
The TPO business is where Open’s future lies. According to D’Auria, wholesale volumes are up 150% year-to-date, and the company’s current pipeline is on pace to double its production in the coming months.
“The company has made significant investments in our DREAM portal technology to coincide with the upcoming release of our new Dream Builder (GNMA DPA) product and our enhanced non-QM offering,” D’Auria wrote to counterparties. “Additionally, Open Mortgage will be expanding its TPO channel offering to include non-delegated correspondent for our loyal and growing base of lender partners.”
