Central Pacific Mortgage Co., a Folsom, Calif., lender founded in 1977, has shut down after a failed attempt to sell its wholesale business to TMSF Holdings Inc.

People close to Central Pacific said repurchase requests, particularly for alternative-A loans, were a major reason for its demise.

Andrew Roth, a spokesman for the California Department of Corporations, said Tuesday that Central Pacific laid off its employees last week and is expected to voluntarily surrender its mortgage license.

TMSF, the Los Angeles parent of the alt-A lender Mortgage Store Financial Inc., said in a filing with the Securities and Exchange Commission late Monday that it had nixed the deal to acquire six wholesale branches and 80 employees from Central Pacific "due to current adverse market conditions."

Attempts to reach John Courson, Central Pacific's president and chief executive and a former chairman of the Mortgage Bankers Association, were unsuccessful at press time. The company had a voice mail message saying its offices were closed.

Slightly more than half of Central Pacific's loans came from its 93 retail net branches. The privately held company was originating $180 million of loans a month, according to TMSF, which is publicly traded.

Central Pacific had expanded to the East Coast with the March 2006 purchase of Ivanhoe Financial Inc., a prime and alt-A lender in Orlando that operated 17 branches and originated roughly $1.2 billion of loans in 2005.

Mark Gelow, a Central Pacific branch manager in Napa, Calif., said that even though the company's net branches operated independently, the corporate headquarters controlled their accounts and swept the money from them last week.

"Some of us had two years' worth of reserves, and now we have to dip in our own pockets to pay the rent," Mr. Gelow said.

Nearly all the net branches in the Central Pacific network were "scrambling" to find new affiliations, he said. The company did not pay salaries for the last two weeks, and as many as 700 employees have lost their benefits, he said.

Employees were notified of the closing Feb. 26 in a one-sentence e-mail, Mr. Gelow said. "It was sudden and abrupt."

Central Pacific's repurchase problems stemmed mainly from alt-A loans, not subprime ones, he said.

"The reality is that the company was undercapitalized, there was an expansion going on, and they had repurchase requests on alt-A loans," Mr. Gelow said. "It only takes a few buybacks if you have other factors contributing to it, like the lack of capitalization."

Central Pacific's staff had worked in the past week to fund remaining loans in its pipeline, he said. Some net branches are likely to close for good, while others that had large accounts may try to recoup their money before the company files for bankruptcy protection, he said.

Joe Lanza, a mortgage banker in Churchville, Pa., who worked at Ivanhoe for five years, said he knew of several Central Pacific net branch managers who have been stuck with the day-to-day back-office expenses that had been shouldered by the parent company.

"They had too many buyback requests, and Wall Street was not buying any of their loans, so their credit lines became nothing," said Mr. Lanza, who now runs his own business using the Ivanhoe handle. "It's impossible to operate when you have so many negative things happen at one time."

In a net branch, the manager has more autonomy than usual and is compensated according to the branch's profits. Some states have criticized the model for not providing enough accountability and oversight.

In interviews last year, Mr. Courson and Paul Reich, Ivanhoe's president and CEO, said their versions of the net branch model included much more central support and oversight than most.

When the deal to sell Central Pacific's wholesale branches was announced last month, Raymond Eshaghian, TMSF's chief executive, said his company would not take on any of Central Pacific's repurchase risk.

Mr. Courson was the MBA chairman in 2003. The following year Gov. Arnold Schwarzenegger appointed him to a six-year term as the chairman of the California Housing Finance Agency.

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Corrected March 8, 2007 at 8:14PM: This article quoted a former branch manager who said employees were notified of the closing in a one-sentence e-mail. He was exaggerating; the memo, which American Banker obtained after the story was published, was seven sentences long.