Fortes Financial of Dallas, buyer of five regional wholesale divisions from National City back in July, has ceased operations today dying a quiet but foreseeable death.

Fortes Financial Fails

Fortes Financial, the idea a viable mortgage company could be made from the ruins of other failed mortgage companies, came from mortgage maverick, Peter J. Levasseur. Mr. Lavasseur distinguished himself at the following companies before opening Fortes Financial: AMRESCO Residential, American Business Financial Services, Home Savings of America and ITT Diversified Financial.

I believe one method was to “cherry pick” the good loans from the bad and purchase only the good ones. The servicing fees from good loans would make the company profitable. If that were the case, then “good loans” at National City turned bad very quickly. Possible, but unlikely. I don’t thing National City would go for this method.

The only method left to Fortes was to buy “the whole lot” at deep discounts and try to make the non-performing loans pay or collect on the mortgage insurance after a loss at foreclosure. Under this method the company lives or dies based on how “deep” a discount it got at purchase. It seems Fortes didn’t buy cheap enough to stay in business. Also depending on mortgage insurance or rebounding housing prices to bail you out of the bad loans, did play out very well either.

This second scenario seems more likely to explain what ended Fortes. This and the fact they could never get traction with the mortgage broker channels that would feed new business to them are my version as to the causes of the demise of Fortes Financial.

Even though this mortgage experiment ended badly, I am sure it was not from a lack of trying. Fortes at it’s highest point had 400 employees and purchased five National City Mortgage wholesale branches.

At least somebody tried to make a bad system better…we need more gutsy guys like Peter J. Levasseur.

Hey Pete, reload with some new investors and take another swing! This time start with the broker end first. Put good brokers in the system upfront, provide a good backend process, and great pricing…you’ll have no problems.

Good Luck!

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