Citizens Mortgage Inc., the Minden mortgage company that relocated from Bloomington, Minn., 15 months ago, closed its doors for good Thursday.
Company founder and president John Billins gave a brief explanation in a statement issued late Thursday:
"Citizens Mortgage Inc., a nationwide company, founded June 7, 1989, closed its operations entirely Feb. 17, 2000. Many factors led to the closing. These were discussed previously in a personal interview (with The Record-Courier) with Mr. James W. Gibbs, Jr., executive vice president, in January 2000.
"Citizens Mortgage Inc. moved its headquarters to Minden in October 1998 from Bloomington, Minn., and received an abundance of assistance from the community and the state of Nevada. The company's management wishes to give its hearty 'kudos' to the people of Carson Valley and the State of Nevada," Billins said.
In Gibbs' January interview, he discussed factors leading to the 50 percent downsizing of the Citizens Mortgage Inc. from 33 employees to 14 at the Minden head office, located at 1625 Highway 88.
"Because of the higher interest rates (currently 8.25 percent), our entire industry has been hit dramatically," Gibbs said then. "A lot of our business came from refinancing, and people aren't doing that as much now with the higher rates. "
Gibbs said several departments had been closed, with the company's attempt to refocus from refinancing to other areas. Although 1998 began with a refinancing boom, he said, by May or June the rates went up, causing the start of the refinancing slump that led to the January layoffs.
"There'll be lot of consolidation in the whole industry," Gibbs said in January. "These are cyclical trends that we're used to - interest rates come and go."
n Local perspective. Jessica Jensen, in the mortgage business for 24 years and currently a mortgage banker with Lakeview Mortgage, said she's seen companies come and go in the mortgage industry.
"I can't speak for what happened to Citizens Mortgage, but sometimes, what can happen in the larger companies is that there are too many layers of management," she said. "Also, anyone who's been in the business knows that rates go up and down - not instantly, though - and as the rates go up, the refinancing business goes down. The trick in this business is to have a product line that meets everyone's needs."
n Company history. Citizen's Mortgage Inc. was founded 10-1/2 years ago in Bloomington, Minn. by John Billins, who had been in the mortgage business at the time for 20 years.
The decision to move here from Minnesota began as a needed expansion of the company's 10,000-square-foot headquarters building in Bloomington and a desire to find a more tax-friendly business climate.
At that time, there were 33 Citizens Mortgage Inc. offices across the United States, with 250 employees.
Citizens Mortgage Inc. took occupancy in a two-story 16,000-square-foot building, built by Mike Hickey Construction in 1998. By January 2000, 17 of the national offices had been closed and the remaining 16 offices had approximately 125 employees, Gibbs said.
n Facts of life. Fred Jones, who was the economic development liaison for Douglas County at the time Citizens Mortgage Inc. moved here, said he was saddened by the company's closure, but felt it was par for the course.
"I think it's a fact of life that goes on in business - like divorces happen in marriage," he said. "There's really no way for anyone doing economic development work to guarantee that all the businesses coming in will be successes."
Jones, stressing that he is not an expert on the mortgage business, said the rise in interest rates certainly could have been a fatal factor for Citizens Mortgage Inc.
"The mortgage companies have been hit significantly by the interest rate increases," Jones said. "The Federal Reserve has raised interest rates four times in the last six months, and yesterday, the chairman, Alan Greenspan, was before Congress, strongly implying that they might raise interest rates again in the next few months. This really impacts the real estate business, and the mortgage business as a result.
"Obviously, Citizens Mortgage was hurting in the recent past - but you don't close your doors if you think there's even a chance the business will survive. I know that other other mortgage companies are still open, but it's a complicated business."
Jones said he feels sympathy for all the employees of Citizens Mortgage.
"I know that if the president is any kind of a human being at all, he'll feel bad about putting all those people out of work," Jones said. "I also know that if it happened once in Douglas County - a company coming here and falling on its face - it can happen again. There are no guarantees. We can just keep trying to attract good businesses. This is like a funeral -these people need a chance to grieve - it's like a death in the family."
Jones is the executive director of the Douglas County Center for Economic Development, a nonprofit public service.
Billins and Gibbs were unavailable for comment Thursday and Friday.
"The closing of Citizens Mortgage is very stressful. I would hope you and your newspaper would understand," Billins said in a letter to The Record-Courier.