Aug. 19–Rising mortgage rates put a high-volume mortgage lender out of business.

Capitol Commerce Mortgage Co., with headquarters in Sacramento and an office in Irvine, closed shop last Thursday due to losses on low-rate loans, according to company memos passed out to the lender’s brokers and a former employee.

Capitol Commerce’s activity ranked it as the 15th largest lender in the state and 17th in Orange County.

“CCMC has not survived the turn in the market and the extraordinary secondary market losses,” said Angela Sykes, vice president and branch manager for the Irvine office, in a letter addressed to brokers.

Neither Sykes nor anyone at the company’s Sacramento offices would comment Monday.

When the company shuttered, Capitol Commerce had $160 million worth of loans through the Irvine office that were ready to be funded, said John Alanis, a former account executive from the Irvine office who had worked there seven years.

Alanis said rising mortgage rates led to the closing. The company thought mortgage rates would continue to decline, an environment in which it thought it could sell the loans to investors for a profit. Instead, mortgages rates rose and the company took a huge loss.

Capitol Commerce closed 2,039 loans from January to June in Orange County, according to market tracker DataQuick. Those loans were valued at $526 million.

Alanis estimates thousands of loans through the Irvine office may have been disrupted from the unexpected company shutdown. He added that most of the company’s business funded loans for Orange County consumers.

“In our business, you cannot bet where interest rates will go,” said Frank Sillman, executive vice president of the mortgage banking division for IndyMac Bank. “If (Capitol Commerce) made a bet, that was their fundamental mistake. They didn’t act like a manufacturing company. They acted like a hedge fund.”

Competitor IndyMac sent letters Monday offering its services to brokers who had dealings with Capitol Commerce. Hundreds of brokers called the Pasadena-based company expressing interest, Sillman said.

Privately-owned Capitol Commerce was the 14th largest in the country based on the $4.2 billion in loans funded in the first quarter, according to Alanis.

The firm had more than 700 workers companywide.

At the Irvine office on Monday, a steady stream of mortgage brokers stopped by to pick up loan documents. About half of the 60 employees at the Irvine office voluntarily showed up Friday and Monday without pay to help organize files and help brokers, said Alanis, 60.

The bare and mostly empty one-story office is a stark contrast to a party held at the office a month ago for filing a record 4,500 loans in a month, Alanis said.

“They were highly respected in the industry,” said Anthony Hsieh, a mortgage banker at Irvine-based HomeLoanCenter.com. “So it came as a surprise to me” when they closed.

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(c) 2003, The Orange County Register, Calif. Distributed by Knight Ridder/Tribune Business News.