Kansas City-based James B. Nutter & Co., one of the nation’s largest private mortgage lenders that since its founding in 1951 has helped hundreds of thousands of Americans buy their first homes, announced that he was retiring from the mortgage business.
The news comes as the company enters the third year of a costly legal battle with the US Department of Justice over Nutter’s alleged mishandling of so-called reverse mortgages.
The government sued Nutter in September 2020, alleging that the company had engaged in fraudulent and deceptive practices in creating the federally guaranteed mortgages. The lawsuit said it involved forging signatures to make it look like qualified underwriters were approving the loans when in fact they were unqualified.
The alleged misconduct occurred from 2008 to 2010, according to the suit, and resulted in the Federal Housing Administration paying tens of millions of dollars in mortgage insurance claims on properties that were worth less than the loan amount.
The company continues to deny wrongdoing and predicts it will prevail in court in a case that could drag on for years.
“Since the complaint was first filed in September 2020, Nutter has maintained that the Justice Department’s allegations are completely without merit,” said Jim Nutter Jr., the company’s president and CEO, in a written statement provided to The Star.
“Furthermore, nowhere in the Complaint alleges that any of Nutter’s borrowers were ineligible or unqualified to receive a loan, or that any action taken by Nutter harmed a borrower in any way. any way.”
The lawsuit and the company’s decision to shut down are not unrelated, according to two sources close to the family who spoke on condition of anonymity. Jim Nutter Jr. had health issues, they said. Along with the stress caused by the lawsuit, this contributed to his decision to retire from the mortgage business and begin shutting down the business.
In an industry where companies that issue loans often resell them to other lenders for collection, Nutter was atypical. If you got your loan from Nutter, you sent your monthly check to him until the loan was paid off. The company managed almost all of its own loans until last spring.
At its peak, Nutter handled $7 billion in home loans in all 50 states and was one of the nation’s top 100 mortgage companies, a company spokesperson said.
“Where the company ranks now, we frankly don’t know,” the company said in response to questions from The Star.
James B. Nutter & Co renamed Nutter Home Loans in 2019 and a year later announced “an alliance” with Tamara Day, the Kansas City star of HGTV’s “Bargain Mansions” home improvement television show. As a company spokesperson, Nutter Approved Day as a source of funding for home improvement projects and his photos feature prominently on lender’s website.
Nutter Home Loans stopped making loans on October 20. Except for a small group of workers who will remain, most of the company’s 125 employees will be laid off.
“We are currently working diligently to take great care of our many loyal and long-serving employees by providing them with well-deserved severance pay and access to career outplacement services that will allow them to pursue other career opportunities,” Jim Nutter Jr. said in his written statement.
His father, James B. Nutter, started the business after World War II by providing home loans in his Kansas City apartment at a time when housing demand was skyrocketing.
Nutter & Co. was among the first mortgage companies to offer loans to the Veterans Administration and developed a method to efficiently manage all the bureaucracy that caused other companies to avoid Federal Housing Administration loans. .
The company’s founder was also proud to provide home loans in minority neighborhoods when other lenders shunned those areas, but didn’t get caught up in the subprime mortgage mess.
“We lost market share because we didn’t make these horrible loans, because it was wrong,” senior Nutter told The Star in 2012.
When Nutter died in 2017, former Ivanhoe Neighborhood Council executive director Margaret May praised him for his commitment to predominantly black neighborhoods like his, not only helping people become first-time homeowners, but also support disadvantaged areas with charitable donations.
“He was a good man. He was a friend of Ivanhoe,” she said at the time. “When you give your money and your time…many times, when we had special events , he would be there.”
The company was a pioneer in launching the government reverse mortgage program when it started in 1989. Reverse mortgages allow homeowners 62 and older to get loans roughly equal to the equity in their home so they can afford to stay there until they die .
Money helps many seniors pay rising taxes and insurance bills on their homes at a time in their lives when they often have less income. The loans are repaid when the house is later sold.
The company maintains that it did not abuse the program and says the government’s lawsuit was overblown.
‘Sign of the times’
David Westbrook, a former public relations officer and longtime friend of the Nutter family, said he was sad to see the business come to an end, but the company’s namesake left a positive legacy.
“It allowed the average consumer to get a first loan they probably wouldn’t have gotten otherwise,” Westbrook said.
Private companies like the one James B. Nutter created, Westbrook noted, are becoming increasingly rare.
“Their withdrawal from this business is a sign of the times because the industry has consolidated so much that the big players are the only ones left, and that’s sad,” he said.
Many of Nutter’s loans are transferred to these big players. Stacy Ford, who lives in a suburb of San Antonio, Texas, told The Star that she and her husband took out a mortgage through Nutter when they bought their first home in 2004 and her parents did business with Nutter. for 30 years.
She appreciated the long-standing business relationship. But when the Fords sold their home and bought a new one this summer, they financed it again through Nutter, only to learn that Nutter immediately sold their mortgage to Planet Home Lending LLC, which as of Sept. 30 had $62 billion. dollars in its loan portfolio. .
A Nutter loan officer told him in an email that the company started selling mortgages last spring in order to “stay viable” due to market volatility.
“We had to do this because the rate we were offering on demand had risen so much at closing that we were losing money on almost every loan we closed for a period of time,” the agent wrote. credit.
The company said on Friday that it has yet to sell all of its loans and is working with potential buyers to ensure Nutter loans receive “the best and most professional level of care.”
Borrowers will receive 15 days notice, as required by law, before their loans are transferred. The company said the Nutter family would remain active in other business and civic interests in the community.