Washtenaw Group Inc. and Genstone Financial LLC were unable to reach a definitive agreement on a proposed transaction to infuse $1.5 million in capital for 6.0 million newly issued shares of common stock, Washtenaw said in a Form 8-K filed Dec. 5.
The company also said that it does not expect to be able to remain in compliance with the condition to closing under its warehouse line of credit facility with Natty Mac, requiring Washtenaw to receive $1.5 million in new capital. The facility will therefore be terminated by Natty Mac, with amounts outstanding to be repaid in an orderly manner.
Washtenaw said it decided Dec. 2 to discontinue mortgage loan production operations due to the termination of the agreement with Genstone, its inability to satisfy closing conditions on its warehouse facility, as well as adverse business conditions.
The company said that it has been impacted by rising interest rates, the subsequent declining demand for new loans, further downward pricing pressure on net sales revenue and continuing mortgage loan repurchases. It will therefore not originate any new loans, effective immediately, and the remaining loans owned by the company are expected to be sold to investors within approximately 30 days.
Washtenaw said it will lay off all employees involved in the origination of new loan production immediately, and it does not know whether or not it will be able to pay those employees severance.