Article Courtesy of The Tampa
By Susan Taylor Martin
September 4, 2016
The company, which buys the rights to collect
delinquent homeowners association debts, is taking the steps because of
a slowdown in collecting the debts.
"One of the challenges in this business is predicting when accounts will
pay off, as we have little control over the speed of the court system
and other variables," Bruce Rodgers, LM Funding's founder and CEO, said
in a press release. "We have experienced a decline in the number of
paid-off accounts in the last two quarters although the average payoff
amount continues to increase."
In a filing
Wednesday with the U.S. Securities and Exchange
Commission, LM Funding said Rodgers' salary would be cut
to $269,500 from $385,000, while the salary of his wife,
Carollinn Gould, would be reduced to $84,000 from
$150,000. Three other executives will also take pay
cuts, for a total reduction in executive base
compensation of 30 percent. (No dollar amount was
LM Funding said its president, Sean Galaris, will leave
at the end of the year to take a similar position at
Condominium Associates, a Tampa firm that manages more
than 300 community associations in Florida.
In addition to the executive changes, LM Funding is
cutting its nonsales staff by 30 percent and reducing
back office wages by up to 20 percent. It also is
selling several of the condos in South Florida that it
acquired through foreclosure proceedings.
"We believe the values of some of our holdings have
peaked and it is time to realize the profits from these
properties and redeploy the cash to purchase more
accounts," Rodgers said in the release.
LM Funding raised almost $10 million
when its shares began trading on Nasdaq last October.
Its business model has been controversial, partly
because of its close ties to the Business Law Group, a
Tampa law firm founded by Rodgers that collects on some
of the delinquent HOA accounts owned by LM Funding.
LM Funding CEO Bruce Rodgers
The two firms have been the target of lawsuits alleging that while
Business Law Group appeared to be working on behalf of the associations,
it really was acting in the best interests of itself and LM Funding.
"The law firm collects "debts from (homeowners) in a manner that
maximizes both attorneys fees and returns for LMF investors rather than
to mitigate loss and bring condominium accounts current," according to a
suit filed last year in federal court in Tampa.
Founded in 2008, LM Funding says it helps struggling associations by
paying them up front for maintenance and repairs in exchange for the
right to collect delinquent fees from unit owners. The amount LM Funding
pays is equal to what the associations would receive by law if the
lender foreclosed — 12 months of delinquent assessments or 1 percent of
the mortgage value, whichever is less.
LM Funding then hires Business Law Group or another law firm to bill the
unit owners. After collecting the debt, the law firm keeps enough to
cover attorney fees and costs and gives LM Funding the interest, late
fees and an amount equal to what it paid the association.
Whatever is left goes to the association.
At the time of its initial public offering last year, LM Funding said it
had bought the collection rights on 11,000 condos in nearly 500
associations in Florida, Colorado and Washington state.
In its press release this week, LM Funding says it looks forward to
working with Galaris, its president, when he joins Condominium
LM Funding has no ownership interest in the company but will help its
clients "with their delinquent accounts receivable," the release said.