Bankrupt Amerifirst Financial seeks approval for loan sale to non-QM shop

AmeriFirst Financial wants the United States Bankruptcy Court for the District of Delaware to approve a private sale of loans worth over $4 million to a non-QM lender.

The proceeds from the sale will pay off the lender’s debt to its warehouse lenders – Centier Bank and Sound Capital Loans LLC – and help in restructuring the company’s operations following its filing for bankruptcy earlier in the year.

Per documents filed by AmeriFirst and holding company, Phoenix 1040 LLC, in early October,  the beneficiary of the private sale and transfer of certain mortgage loans and related assets would be Oaktree Funding Corp, a non-QM lender that AmeriFirst Financial has done business with in the past.

If approved by the Delaware court, Oaktree would foot the payoff value of the retail loans held by Centier Bank (13 funded loans worth $4.8 million). In return, the bank would release $1.4 million of cash collateral to AmeriFirst.

Additionally, Oaktree would pay $293,000 to Sound Capital for two closed and partially drawn commercial loans for the purpose of retiring AmeriFirst’s secured obligations to Sound Capital Loans under its warehouse line. 

The last part of the proposed deal between the bankrupt lender and Oaktree would have the non-QM lender assume AmeriFirst’s obligations for the representations and warranties on the loans being purchased, documents show.

By greenlighting the sale, the court would also resolve “potential costly litigation” between it and Oaktree stemming from a financing and profit sharing arrangement both parties entered into in December 2022, AmeriFirst claims. 

AmeriFirst alleges that there is outstanding monies owed to it in the amount of $425,000. If the deal goes through, the non-QM lender will apply that amount to “satisfy the unpaid 2.43% of the funded amount of the buyer loans,” the debtors motion filed October 5 said.


“Time is of the essence,” AmeriFirst wrote in its plea to the court. “Delay simply increases uncertainty and administrative costs.”

Oaktree did not immediately respond to a request for comment. AmeriFirst’s legal counsel also did not respond. Law360 first reported on the lender’s request.A hearing in the bankruptcy case is scheduled on Oct. 25 in the Wilmington, Delaware federal bankruptcy court. If the deal is approved by the court, it would close within 10 days, documents show.

The loan sale request comes just two months after the Mesa, Arizona-based shop filed for bankruptcy, seeking Chapter 11 protection. Prior to this, the firm supposedly ceased operations in December, but briefly revived originations in June.Last year, the lender originated $2.4 billion in mortgage volume, according to S&P data. Through April, AmeriFirst originated $110 million in volume for 215 loans. The mid-sized firm offered conventional, government-sponsored and reverse mortgages and is licensed to operate in 44 states and serves customers via branches located in over 20 states

AmeriFirst is at least the third lender to file for Chapter 11 protection in the past 16 months, with a fourth, Sprout Mortgage, targeted in a recent involuntary petition. Federal judges have ordered bankruptcy financing for lenders First Guaranty Mortgage Corp. and Reverse Mortgage Funding.


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