Nathan Bomey | USA TODAY

Ramon Padilla, Frank Pompa, Berna Elibuyuk, Charisse Jones, Michael Struening and Philana Patterson

Mortgage lender Stearns Holdings filed for Chapter 11 bankruptcy protection Tuesday with plans to maintain operations, blaming its woes in part on increased interest rates.

The company, which owns Stearns Lending and is the nation's 20th largest mortgage lender, had piled up an unsustainable amount of debt and began to struggle when the housing market faced higher borrowing costs.

Stearns slashed its annual expenses by 40%, including job cuts, but it wasn't enough to stabilize the company's finances, according to a court filing.

The company said in a court document that its bankruptcy was not related to any lending mistakes as it "has maintained disciplined lending standards with a focus on high credit standards and mortgage loan quality."

With 2,700 employees, Stearns originates loans in all 50 states. The company gets 55% of its loans through wholesale connections, which happens when independent mortgage brokers hand off loans.

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It also operates more than 100 retail branches where it provides loans directly to customers, and it has multiple joint ventures. The company sells the loans it originates, with about 80% to 85% going to Fannie Mae, Freddie Mac or Ginnie Mae.

The company said it would continue running its business and borrowers must continue to pay their mortgages.

Stearns no longer services loans. The company sold its mortgage servicing rights for an anticipated $224.6 million in 2018 to Freedom Mortgage Corp.

The bankruptcy comes after the rise in interest rates in 2017 and 2018 "reduced the overall size of the mortgage market, increasing competition and significantly reducing market revenues," Stearns President and Chief Financial Officer Stephen Smith said in a court filing.

Although interest rates have ticked down in recent months, the spike since the 2016 presidential election proved too much for Stearns to handle.

In recent months, the company faced pressure from its own lenders to stabilize its finances as it faced impending payments on its own debt.

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Those financiers, known as warehouse lenders, "began reducing advance rates, increasing required collateral accounts and increasing liquidity covenants, further contracting available working capital necessary to operate the business," Smith said.

One of them cut off Stearns on June 28, and another signaled plans to do so on July 15.

Stearns feared that those actions could lead the company into liquidation.

Investment firm Blackstone owns 70% of Stearns, having acquired its stake in December 2015 from founder Glenn Stearns, who now owns 29%.

Blackstone and Stearns have been sparring in recent months with Pacific Investment Management Co., which owns 67% of the $183 million in senior secured notes owed by Stearns.

Smith said discussions with PIMCO failed to reach an agreement restructure the company without bankruptcy.

Blackstone is injecting $60 million in cash into Stearns and providing a loan to help the company navigate bankruptcy, which is intended to cash out the notes that have been weighing the company down.

Stearns had $1.22 billion in assets and $1.16 billion in liabilities as of April 30.