Thursday, August 2, 2007

Has The Demise of Indymac Bank Started?

Dear Valued Customer,

As you are all well aware, the secondary markets are currently very volatile, and, in fact, other than the GSEs and Ginnie Mae, there is virtually no secondary market liquidity at present. While Indymac has very strong capital and liquidity, we need to adapt to current market conditions and be very careful with the loans we are funding.As a result, we, along with most other major mortgage lenders, need to make additional product cutbacks and implement additional price widening in order to ensure we can sell the loans we are funding. While we hope that this current difficult environment will be short-lived, we all need to be realistic and be prepared to work within this tough market for a protracted period. In that respect, we need to quickly move as many borrowers as possible to this more full doc, conforming loan environment so that a greater percentage of our loans can be sold to the GSEs.I also want to reaffirm to you our commitment to the mortgage business and assure you we will stay focused on providing you a stable, reliable business partner you can count on to meet your needs, along with the needs of your customers. Indymac Bank?s financial strength combined with and the stability of our national savings and loan charter will ensure we will be one of the strong survivors from this difficult period. I want to thank you for your business and for your commitment to Indymac Bank. We look forward to building an even stronger relationship going forward.

Best Regards,Walter TharpCEO, Wholesale Lending

Monday, May 21, 2007

Mortgage Tree Lending, Bye, Bye!

Since WJ Bradley Company could not work an acquisition deal, Mortgage Tree Lending has been chopped down.

Thursday, May 17, 2007

Columbia Home Loans, LLC is officially gone.

OceanFirst Financial Corp. said it decided to close down its mortgage banking subsidiary as the unit incurred significant operating losses in the last two quarters from subprime mortgage loan originations.
The bank holding company estimates $900,000 in employee severance and lease cancellation charges related to the closure of the unit, Columbia Home Loans LLC, it said in a filing with the U.S. Securities and Exchange Commission.
"The discontinuation of Columbia's operation is expected to be completed within six months," the filing said.
On April 25, OceanFirst had said it was in talks with an interested party on the sale of Columbia Homes and that it would shut down the unit if the talks failed.

Sunday, May 6, 2007

Texas Wholesaler Shuts Down!

First Consolidated Mortgage Co. is closing down, a spokeswoman confirmed Thursday. A month ago, the wholesaler told its brokers it would stop accepting subprime business. First Consolidated reportedly started business in Texas during 1994. Unfortunately they are another victim of the subprime meltdown.

Friday, May 4, 2007

Homeland Capital Group Goes Kaput!

Just in..............................

Effective immediately, we will no longer accept Wholesale submissions for approval. It has truly become impossible for us to compete in the current environment with the consistency that we, as well as our brokers, are accustom to and deserve.
Therefore, we will accept any legitimate prior approvals in the form of final packages between now and the 15th of May. Those, and any current files pending, must have stips cleared and close by the 22nd of May.
Bob Garrison Executive Vice President First Greensboro Home Equity, Inc.

New Century Is Finally Gone For Good!

I just received this email from a former AE from New Century.

Some of you may or may not have heard the news yet. Unfortunately as much as this is a shock to myself and everyone at our company its a sad reality of the state of the sub prime industry today. The abridged article is below.

Subprime mortgage lender New Century Financial Corp., failed to receive any bidsfor its mortgage loan origination business, forcing it to shut down the unit and lay off around 2,000 employees.

The company, which has been preparing to sell off its assets underChapter 11 bankruptcy protection since last month, notified employees during aconference call that they would be laid off effective Friday.

New Century President and Chief Executive Brad A. Morricesaid despite a number of potential buyers for its wholesale and consumer-directoperations, "none of those potential deals have come to pass."

I have been planning on a worse case scenario for some time. As many of you know, I was one of the top Account Executives for New Century so I have had many recruiters and managers interested in bringing me over to work for their perspective company. Although at this time I am finalizing negotiations with a few select companies I have chosen, I have yet to reach a decision as to what company will best suit myself and all of you, my valued clients and friends. I expect that given the recent turn of events my decision will soon be hastened and I will finalize something in the short term.

Some of you may or may not have relationships with these existing lenders. If you do have an existing relationship with the particular lender I go to, it will be up to you to decide who you think will best be able to service your needs. I will be having those conversations with you one on one once my decision and negotiations have been reached with the perspective company.

Effective at the end of today, this email will be shut down and I will only be reachable via cell phone or the alternate email below.

The subprime fallout continues.....................

Thursday, May 3, 2007

Dana Capital is Closed For Good!

There has been rumors that Dana Capital was going under. This was confirmed as of Monday.

I personally went in to their office today to pick up a check for a file they´ve been holding funds on since mid Jan. The following text was posted on their door. I´ll be able to get the picture off my cell phone later and post a link:
"Dana Capital has chosen to wind down its activities through dissolution under State Law. Dana Capital will not be filing a bankruptcy -- but rather will orderly liquidate its assets. You should receive notice of such and a status report within the next couple of weeks via email."
Posted on the door of 8002 Irvine Center Drive, Ste. 1200, Irvine, CA the headquarters of Dana Capital Group at least as of 4/30/07.

Nation One Mortgage Shuts Down

Hot off the press..................

Dear Broker;

Effective immediately, Nation One Mortgage Company, Inc. is ceasing the origination of all mortgage loans. No new loan submissions are being accepted at this time. If you have received this message, our records indicate that you do not have any loans that are currently in an approved and locked status. We have appreciated the opportunity to serve you and your customers. Call 1-800-624-6662 to confirm.

Wednesday, May 2, 2007

First Consolidated Exits Subprime Biz

The fallout continues. Just in....

First Consolidated Mortgage is no longer closing or accepting submissions for wholesale subprime loans.

Crevecor Goes Under

Just in.....

Crevecor mortgage is gone but a rumor has started that the company is renaming itself Heartland Funding/Mortgage. Keep you posted.

Friday, April 27, 2007

Millennium Funding Group Folds

Just in......

Due to the current market conditions in our industry, Millennium Funding Group has elected to discontinue origination of residential mortgage loans. Effective immediately , we will no longer accept new mortgage loan applications, or issue approvals on new loans. However, in order to accomodate our borrowers, and our mortgage broker partners, we will continue to fund loans on which we have sent closing documents out through May 11, 2007.

To best serve your customers, we request that you place loans currently in the pipeline on which we have not sent closing documents to other lenders.

We regret having to take this action at this time and are hopeful we can partner with you again sometime in the near future.

If you have any question please call 360-433-6260.
Thank you for your understanding.

Wednesday, April 25, 2007

E-Mail to MILA Workers: Business Ends Today

Employees at wholesaler Mortgage Investment Lending Associates Inc. (MILA) got an unpleasant surprise when they opened their e-mail last Friday: "It is with deep regret that due to ongoing negative market conditions MILA is forced to close its doors at the end of business today." Roughly 300 workers lost their jobs.The Mountlake Terrace, Washington-based mortgage wholesaler specialized in the subprime market through its hallmark automated online system that delivered loan commitments within seconds, minutes or hours, rather than the conventional process that could take days.The company’s mortgage lending doubled in 2003, growing from about $550 million in the prior year to well over $1 billion.The rapid growth of the business prompted founder, principal owner and CEO Layne Sapp to purchase an empty office building to house his expanding staff as MILA operations branched into other states.MILA’s growth continued into 2005 as the company made several billions of dollars in loans and brought employment to 700 workers.Foreseeing the eventual downturn in the subprime market, MILA began to pare down its workforce and move into the Alt-A market.Despite such moves, the company was unable to weather the subprime storm as loan buybacks began to haunt MILA.However long Sapp had mulled the closure of the company he began in 1989, the news for staff and brokers working for the company was swift and final.By Monday, the website was already taken down, leaving only a blank white screen.

Tuesday, April 24, 2007

WaMu Originations Down as Earnings Drop 20%

Loan production fell once more at Washington Mutual Inc. as quarterly earnings dropped 20% on subprime troubles, prompting the company to refinance up to $2 billion of their high-risk mortgages at fixed-interest rates below-market. Washington Mutual, the largest savings and loan in the nation, reported a net income of $784 million for the first quarter, down from $985 million in the same period a year ago. Revenue for the quarter was $3.62 billion, up from $3.59 billion one year earlier. The company’s mortgage division posted a first-quarter loss of $113 million compared with a $52 million profit during the year-ago period. Sales of subprime mortgages accounted for a quarterly loss of $164 million, overshadowing a “solid” performance in home loans to borrowers with better credit. "The decline in home loan volume from the fourth quarter was the result of the proactive steps the company has taken to reduce its subprime exposure through this point in the cycle," said Chairman and CEO Kerry Killinger.WaMu said it has scaled back its subprime portfolio and has set aside $234 million for the quarter to cover future loan losses from just $82 million in first quarter 2006. At the end of March, Washington Mutual had $20.4 billion of subprime loans, representing 9% of its $217 billion loan portfolio.The Seattle-based company reported that 71% of total volume was adjustable-rate mortgages and approximately $21.9 billion of the total was refinances.Home equity loans represented $8.3 billion of the total quarterly volume, down from $8.5 billion during the fourth quarter.Of the $37.6 in fundings for the quarter, WaMu said that about $22.7 billion came from the correspondent channel, while retail fundings represented $13.0 billion and wholesale volume accounted for $6.2 billion.Washinton Mutual said its mortgage servicing portfolio was $709.2 billion at the end of March, down from $794.8 billion one year earlier.The company indicated that it would refinance up to $2 billion of its own subprime mortgages at fixed interest rates discounted by 0.50%. WaMu has created a team of specialists to guide borrowers who are not yet delinquent but expect an ARM payment increase in the near future. Another group in the company will work with delinquent borrowers on creating financial solutions for their home loans.

Monday, April 23, 2007

Opteum Stops Taking Applications For Wholesale Channel

Real Estate Investment Trust (REIT) Opteum Inc. has announced that it has stopped accepting new applications through the conduit and wholesale mortgage origination channels at its subsidiary, Opteum Financial Services LLC, effectively shutting down those businesses.Opteum suggested that the actions are mostly the result of both deterioration in the secondary market for closed mortgage loans and a long-term weakening of consumer demand for mortgage products and services. "In the last month or so…the secondary market for mortgage loans has experienced significant distress and substantially increased volatility that was initially precipitated by lax underwriting standards, early payment defaults and high delinquency rates involving subprime mortgages and concerns over the general state of the U.S. housing market," said Jeffrey J. Zimmer, Chairman, President and CEO of Opteum Inc. "Recently, some secondary market investors in closed mortgage loans have changed their terms and have delayed settling whole loan trades involving certain Alt-A mortgage products. This has forced (Opteum) to re-market loans in respect of which it believed it had already obtained purchasing commitments, and has resulted in an estimated $22 million pre-tax loss associated with mortgage loans originated by (Opteum),” Zimmer continued.“Because we believe that the current adverse market environment may continue in coming quarters, we intend to exit the Conduit and Wholesale mortgage origination businesses." The Florida-based REIT also said the action will not affect the continued origination of loans through its network of 230 retail loan professionals in 24 offices across Georgia, Florida, Illinois, New Jersey and Massachusetts.

Sunday, April 22, 2007

WMC Mortgage Cuts 50% of Staff, ResCap Cuts 1,000

WMC Mortgage, the subprime unit of General Electric Co., announced it would eliminate more than 50% of its staff as Residential Capital, the mortgage unit of GMAC LLC said it was terminating about 1,000 positions in addition to a previous round of 1,000 layoffs from January.Burbank, California-based WMC Mortgage currently employs about 1,470 workers, but plans on slashing that number down to 700.In March, the lender disclosed that it had eliminated 460 positions.The latest round of layoffs follows news that company originations plummeted to $3.4 billion in the first quarter from $9 billion during the previous three months.In addition to the workforce reductions, offices will close in Costa Mesa and San Ramon, California, as well as Addison, Texas.WMC has recently replaced some of the company’s top executives, including the chief executive officer and chief finance officer.GE acquired WMC in 2004, but the subprime unit is estimated to represent just a fraction of a percent of profit at GE in 2006. Meanwhile, Minneapolis-based ResCap said between 600 and 700 workers would lose their jobs by midyear, and a minimum of 300 vacant positions won't be filled. The GMAC unit announced in January it would layoff 800 employees through October and would leave another 200 open job positions vacant.Following the reductions, ResCap will have about 12,000 employees.In the past weeks, the company has also seen the exit of its chief executive officer, chief financial officer and treasurer.

Friday, April 20, 2007

The List Continues To Grow

MILA goes under

As of 4/20/2007 rumor has it that Mortgage Investment Lending Associates (MILA) is going under. At 4:30 CST the web site was down with the home page listing a thank you page to all the brokers that conducted business with MILA over the years. It read
"MILA would like to thank all of the mortgage brokers we've done business with over the years. Due to current market conditions, we do not have the resources available to continue lending. It is with great regret that we announce we are ceasing operations effective April 20th, 2007."
As of 9:00pm CST the website homepage is back on but you can't access the back office.

Thursday, April 19, 2007

H&R Mortgage Corp. Adds Lay-Offs

An Option One Mortgage Corp. subsidiary is closing its doors. AcuLink Mortgage Solutions LLC has filed a Worker Adjustment and Retraining Notification Notice with Florida indicating it will lay off 67 people on June 12, 2007. According to an announcement, the company was originally launched in 2005 with the help of ValuAmerica to provide settlement services to H&R Block Mortgage Corp. and initially included a staff of approximately 30 people. H&R Block Mortgage Corp. announced earlier this month that they had laid off 141 employees in Tampa due to a move to H&R Block Bank.

ResCap to cut 1,000 more jobs

Residential Capital will eliminate more than 1,000 jobs as the company tries to regain its footing amid a severe slump in the subprime mortgage market.
The Bloomington-based mortgage lender, one of the country's largest, said Wednesday that about 86 positions in the Twin Cities will be affected. The company, which is jointly owned by General Motors Corp. and Cerberus Capital Management, employs 1,900 people in Minnesota.
The cuts come on top of a 1,000-job reduction the company announced this year, which included 47 local positions. Together, the two rounds of job cuts represent about 15 percent of Residential Capital's 13,000-strong workforce.
Most of the layoffs will be in the company's U.S. home mortgage operations and corporate services, which includes finance, human resources, legal and marketing, according to company spokesman Brett Weinberg.
"Because the U.S. mortgage market continues to underperform, we regret to have to announce additional layoffs," Chief Operating Officer Jim Jones wrote in a memo to employees. "The reductions are an unfortunate necessary step in the plan to return [Residential Capital] to health and profitability, and to position us to effectively capitalize on the opportunities ahead."
About a third of the 1,000 positions are already vacant, leaving 600-plus people who will actually lose their jobs.
The layoffs come one day after the company said that Chief Executive Bruce Paradis will retire in June. Over the past month and a half, most of the company's senior management team has left, including its chief operating officer, chief financial officer and treasurer.
Jones, who joined Residential Capital, or ResCap, in March, will replace Paradis.
Rising subprime mortgage defaults have taken a toll on lenders across the country, but ResCap has proved particularly vulnerable. The company offered some of the riskiest mortgage products, including interest-only mortgages, and subprime loans that required little or no income documentation.
Last month, the company said it lost $651 million in the fourth quarter, compared with a profit of $118 million during the same period a year ago.
In 2006, ResCap earned $182 million, compared with a profit of $1 billion the previous year.
"ResCap did not move quickly enough to reduce exposure in the face of this downturn," Paradis recently told investors.
ResCap has said that it will cut costs, tighten underwriting standards, and accelerate "lost mitigation efforts" to help borrowers pay their bills and avoid foreclosure.
The company will also receive $1 billion in new capital from GM.
But company executives and analysts warn that the subprime market will deteriorate further this year.
Interest rates on more than 10,000 of the company's subprime adjustable-rate mortgages will reset by the end of the year, with many borrowers seeing their monthly payments jump by more than 30 percent, which likely will lead to more defaults.
Jones' memo said he is confident ResCap will recover.
"The next few months will determine how well ResCap will emerge from this market disruption and how fast we can begin to capitalize on the opportunities ahead," Jones said. "We are already seeing signs that the strong will grow stronger. We will be in their company."

Monday, April 16, 2007

Three Wholesale Lenders Shut The Door on Business

Both First Horizon Home Loans and First Source Funding Group Inc. have shut down their nonprime wholesale lending channels as Homefield Financial announced the closing of its Alt-A wholesale lending division.Irving, Texas-based First Horizon will no longer be accepting applications from mortgage brokers for nonprime loans.The decision to exit the nonprime business comes as many wholesale lenders have seen profit margins evaporate, coupled with dwindling bids from Wall Street firms distancing themselves from such loan pools.About 60 positions will be eliminated as a result of the strategy, which will not affect their conforming and home equity lending to brokers.Irvine, California-based First Source announced that it has ended mortgage banking operations, effective immediately.The company said it hopes to accommodate existing transactions by making “every effort” to fund locked loans with loan documents that were drawn and released by March 8, 2007.On March 9, First Source announced that it stopped accepting new loan applications, as well as requests for rate locks or loan documents.Also based in Irvine, Homefield Financial has announced that it is shutting down its Alt-A wholesale lending division."It is with great regret that Homefield announces that the Homefield wholesale division will no longer be accepting broker applications for consideration of a broker/lender relationship," said Homefield on its website.Homefield was established in 1998 and went on to make the Inc. 500 for both 2004 and 2005.Last August, the company reported $2.5 billion in annual originations and announced an expansion into Las Colinas, Texas to create 200 new positions.

Monday, April 9, 2007

WareHouse USA Takes an Exit

The warehouse lending subsidiary of NovaStar Financial Inc. is getting out of the mortgage industry. According to a statement posted on their website, Warehouse USA Capital Corp. has stopped taking new applications for their mortgage warehouse lines-of-credit. Existing clients are being notified and their loans will now be closed according to their agreements with the Roswell, Ga., company. The lender which was reportedly founded in 2003 as NovaStar Capital Inc., financed up to 100 percent of Alt-A and nonprime mortgages. Its programs included USA Direct, USA Express and USA Pro. The statement released by the ender stated," All new funding activity by Warehouse USA under existing warehouse lending lines is expected to be concluded on or about April 27,2007. The closure of the warehouse lending business will not impact direct mortgage loan funding by, or any other business of, any NovaStar entity."

Fieldstone Cuts 14% of Workforce

Columbia, Md. based company, Fieldstone announced it is consolidating operations and trimming staff. Six wholesale operations offices will be shut down immediately, however, the Account executives will remain in the areas where the offices are being closed. Nine additional branches will be closed, while home office staff reductions are being evaluated. According to the company's statement, currently 125 people are affected by the layoffs. They expect all consolidation to be complete by the second quarter. Credit-Based Asset Servicing and Securitization LLC - or C-BASS, which has agreed to acquire Fieldstone, lowered its acquisition price from $5.35 per share to $4 per share. Their reasons for lowering the price per share were additional liquidity problems. Fieldstone also announced in February it paid $10.6 million to settle shareholders litigation. The real estate investment trust said it expects to take a $550,000 pre-tax charge in the first quarter as a result of the consolidations.

Monday, April 2, 2007

SouthStar Funding Ceases Operations

Two years ago SouthStar Funding introduced a very aggressive loan program called the Simple Score specifically for borrowers with credit scores of 540 or higher, on all property types up to $1 million and for up to 100 percent loan-to-value. This program helped the company become one of the fastest growing privately held companies in the country. Today the company succumb to pressures of a changing mortgage industry and had the following statement posted on their website, "SouthStar Funding, LLC sincerely regrets that it was necessary to cease its mortgage lending operations. The recent unprecedented downturn and policy changes in the mortgage industry necessitated this action. SouthStar appreciates its employees' and customers' loyalty to the company throughout the years". The Atlanta-based wholesale lender was founded in 1998 with 25 employees by partners Kirk Smith, Brian Smith, Mike Fierman and Tyler Wood. The company reported a production of $4 billion in 2004. In 2005, the lender made the 24th annual Inc. 500 ranking with 329% year-over-year sales growth from 2001 to 2004. However, things started to go downhill for the lender last year. SouthStar became involved in a discrimination suit with the National Community Reinvestment Coalition (NCRC) in March 2006 after they filed a complaint with HUD. The NCRC claimed Southstar Funding had discriminatory lending practices towards African American and Hispanic borrowers because they refused to approve loans on any row houses valued less than $100,000 and on any row houses in Baltimore. (See LenderLoft September 2006 archives to read more about the story).

Wednesday, March 21, 2007

MLN Closes its Doors

Mortgage Lender's Network USA, a $17 billion loan servicer of subprime loans filed for bankruptcy protection in early February. The company said it owed creditors $92 million. In a phone conversation with a representative earlier this week, learned that MLN will no longer accept any loan applications and will officially close its doors in mid April. MLN is just another in a string of several subrpime lenders who have made the announcement that they are shutting down. If you have a pending loan with MLN, they company advises you to contact their customer service department to have the loan documents returned to you for submission to a different lender.

People's Choice Files for Chapter 11

The privately held lender, People's Choice, filed for chapter 11 bankruptcy protection this week. The lender has been hard hit by the news of record number of home loans going into foreclosure, led by the subprime sector. People's Choice is only the latest to join the list which includes Mortgage Lenders Network USA Inc., Ownit Mortgage Solutions Inc., and ResMae Mortgage Corp., which all filed for bankruptcy protection as well. Filing the same day as People's Choice Home Loan was People's Choice Funding Inc. The companies are both subsidiaries of People's Choice Financial Corp., a real estate investment trust. Both subsidiaries estimate they have more than $100 million each in assets and liabilities. People's Choice Home Loans posted the following statement of their website, "People’s Choice Home Loan, Inc. is unable to continue the origination or funding of mortgage loans, and no new loans are being accepted. We are in the process of contacting customers and brokers to inform them that we’re returning their loan applications, and to assist them in obtaining funding for pending loans."

Tuesday, March 20, 2007

FMF Capital LLC and Domestic Bank Close Wholesale Lending

Domestic Bank announced on March 7 they would be shutting down their wholesale division due to low bids and lack of bids on some of its nonconforming loans that are coming from Wall Street. FMF Capital LLC announced on March 9 they would cease operations. They succumb to three class action lawsuits which were filed against them in Michigan, Ontario and Quebec, Canada. The suits alleged that the company "violated the Michigan Uniform Securities Act, committed fraud and took part in negligent misconduct."

Monday, March 19, 2007

New Century Watches as the Walls Crumble

Founded in 1995 by Brad A. Morrice, Robert K. Cole and Edward F. Gotschall, New Century focused on providing subprime loans that it then sold to investment banks, using that revenue to them fund more consumer loans, In 2003 and 2004, Fortune Magazine put new Century on their list of 100 fastest-growing companies. Over the years New Century Financial Corp. enjoyed flying high amid a strong housing market and a non stop demand from borrowers for subprime home loans to chase the American Dream. As recently as four months ago, CEO Morrice gave a positive outlook at an investor's conference. Despite acknowledging the growing challenges of subprime lending, Morrice said it was "an excellent business for the long term. However, faulty accounting and rising mortgage defaults have left New Century on the brink of bankruptcy. its stock has crashed and creditors and pressuring it to buy back billions of dollars in loans. Like many of its counterparts, New Century profited during the real estate boom, when appreciation rates were high and equity protected most home buyers from defaulting on their loans. Most could simply refinance or sell homes at a big enough profit to pay off mortgages and move on. Investments banks also became eager and jumped in to buy loans from subprime lenders and then separate them into bond products to sell on Wall Street. This helped New Century hit a record high on $65.95 in December 2004. Its earnings one year later also reflected a company that was flying high, despite mounting concerns over a weakening housing market. New Century posted net earnings that year of $411.1 million, or $7.17 a share, up from $375.6 million, or $8.29 a share, in 2004. Its loan production in 2005 hit a record $56.1 billion as it enjoyed four consecutive dividend increases. By 2006, the housing market took a downward turn which led to weaker price growth and declines in some high priced markets. On Feb. 7, the outlook for New Century changed and it informed the Securities and Exchange Commission that it would have to restate financial results for the first three quarters of 2006 since it had failed to accurately tally loses from loan repurchases. New Century stopped accepting new applications and revealed that its lenders had cut off funding and it also said it did not have enough funds to pay outstanding loan repurchase obligations. At this juncture the most likely outcome for the company will be to file for bankruptcy and be sold in a bankruptcy type auction.

Investaid Corp. Takes an Exit

Ivestaid joined the several other subprime lenders to exit the market this week. The company ceased acceptance of applications on March 15 due to the instability in the subprime market; however, President Bob Rubin is hopeful and he believes that the exit is only temporary. In an email sent to its employees, Rubin wrote "the conditions in the market continue to collapse and the pressure placed upon our affiliated bank from regulatory agencies with regards to subprime is impossible to bear." He also noted that the temporary shut down of the company is due to the massive meltdown and perception of loans in the subprime sector. The temporary closure if the origination arm of the company, which funded $37 million per month and offered 100 percent financing to subprime borrowers, has resulted in approximately 40 layoffs of which half were in origination and the other half were in support staff. Twelve employees have been retained to service and sell loans. Investaid is currently licensed in the states of Indiana, Florida, Kentucky, Wisconsin, Missouri, Arizona, Colorado, Nevada and Utah. Rubin stated that these states are economically more stable and they are able to impose stricter prepay penalties. Before announcing the temporary closing, the lender has plans to branch out into Kansas. The company reportedly had a base of approximately 2,500 brokers, though number it did business with was smaller. Investaid focused mostly on combined loan-to-value loans and among its plans were to look for opportunities in the CLTV arena and in foreclosure bailouts which it offered at 65 percent LTV.

Sunday, March 11, 2007

Fremont General Corp. Exits the Subprime Market

A proposed cease and desist order was received by the Santa Monica, Calif. company, Fremont General Corp. from the Federal Deposit Insurance Corp. or FDIC on February 27. The order asked the company to "make a variety of changes designed to restrict the level of lending in its subprime residential mortgage business. However, Fremont indicated that it would continue to seek deposits and originate commercial mortgages. In a press release from the company, the president and Chief Executive Officer for Fremont said, "Thanks in part to its substantial equity and $8 billion retail deposit franchise, Fremont Investment & Loan has significant balance sheet strength and funding capacity that we believe will enable us to exit the subprime lending business in an orderly and disciplined way." Last month, Fremont informed its brokers that it would no longer make piggy-back seconds and all other second lien loans. On Jan. 8, Fremont had eliminated 95 percent loan-to-value mortgages that are purchase money and stated income. In a statement posted on their website, the company said that they will no longer accept new applications and are trying to reach a decision on what to do about the loans that are in process.

Thursday, February 15, 2007

Lenders Direct Capital Corp. Closes its Wholesale Lending Division

Lenders Direct Capital Corp., a nonprime lender based in Lake Forest, Calif. has closed its wholesale lending division and laid off 150 people. They stopped accepting applications from brokers on February 9. Chief Executive Officer, Michael McQuiggan said the lack of "investor demand in the subprime industry is such that we felt it was prudent to do it at this time." Adding, "the liquidity of subprime loans seems to be in a state of flux." Wholesale loans had accounted for 80 percent of the company's production and only about $20 million of its total volum of $100 million was from retail operations. The retail division which currently employs 40 to 50 people will remain in business. Some of the programs high lighted on their website included the Lender Premium Blend which indicated an 80/20 full doc loan and required a 580 middle score and 2 years written verification of employment. The program was also available as a stated doc loan with a 620 middle score. Other programs included the Lender's Choice which allowed 24 months personal bank statements to 95 percent LTV and a 125% CLTV equity stated second program.

Wednesday, January 3, 2007

Demise of Ownit Mortgage hits home

Tamika Williams worked in Phoenix for a mortgage company based in Agoura Hills. But her fate was tied to Wall Street, as she found out when she lost her job a few weeks before Christmas.Williams, 29, was among 800 employees nationwide who were laid off when Ownit Mortgage Solutions Inc. announced that it was closing its doors immediately — and had no money to pay its employees."I'm the primary wage earner for my family," Williams said, "and now I have four little children to support with nothing coming in."When Ownit filed for Chapter 11 bankruptcy protection last week, its chief executive and sole director, William Dallas, expressed regret at how the company's destiny had spun out of his control. Dallas described the filing as the only way to ensure that his former employees would be paid before other creditors — "a small, yet meager victory for the good guys," as he put it.The private company, which made higher-cost mortgages for borrowers with imperfect credit scores and income gaps, relied on Wall Street to fund its loans, buy them and sell them off as securities.Last month, as defaults on the risky loans rose, the Wall Street firms seized millions of dollars of Ownit's capital to compensate for losses and then shut off the money spigot entirely, Dallas said. The bankruptcy filing revealed that Merrill Lynch & Co., JPMorgan Chase & Co., Credit Suisse First Boston and other mortgage purchasers were demanding that Ownit buy back more than $165 million in loans on which borrowers had missed payments.Ownit's demise is an example of wider troubles among independent sub-prime lenders, which, unlike more diversified banking companies, depend heavily on Wall Street for loans and services. "This is going to end badly" for the industry, Dallas predicted.Ownit's most important partners — the ones that abandoned it, as Dallas sees things — were JPMorgan Chase, which provided cash to fund its loans, and Merrill Lynch, which supplied a major line of credit for Ownit and processed its loans into bonds for sale to investors. William Halldin, whose Sacramento public relations firm represents Merrill, said his client found it "unfortunate that Ownit closed its doors," but added: "We met every contractual obligation we had to them."A JPMorgan spokesman declined to comment.Ownit, which doesn't publicly report financial results, had become unprofitable and no longer met JPMorgan Chase's requirement for net worth, Dallas acknowledged. Nonetheless, he said, he had believed Merrill Lynch would put up funds to nurse Ownit through tough times. After all, Dallas said, Merrill had become a part-owner of his company in 2005. And Ownit was on track last year to generate $10 billion of the mortgages that Merrill and other Wall Street firms coveted as raw material for lucrative bonds.Global appetite for mortgage-backed bonds helped sub-prime specialists emerge in the mid-1990s as competition for old-line finance companies. After a near-meltdown in 1998, when Russia's debt default drove investors to flee to ultra-safe Treasury bonds, the bond market resumed its love affair with securities backed by sub-prime loans. Issuance of sub-prime mortgage bonds jumped from less than $13 billion in 1995 to $594 billion in 2005, according to analyst Michael Youngblood at Friedman, Billings & Ramsey Inc., with a slight dip, to $521 billion, expected in 2006. Many of the lenders were based in Southern California, including the Ameriquest group of companies in Orange and Irvine-based New Century Financial Corp., which in 2004 and 2005 were the largest sub-prime mortgage lenders. (Wells Fargo Inc. and HSBC Group, major banking concerns with sidelines in sub-prime home loans, held the top two positions last year, according to data tracker Inside B&C Lending.) Wall Street firms help the independent lenders pool hundreds of millions of dollars in mortgages and then distribute the payments on those loans to back various tiers of bonds. Safety-minded investors buy top-rated bonds that are repaid first or are insured, but Wall Street also creates high-yield, riskier bonds for hedge funds and other aggressive investors. As interest rates fell and home prices soared earlier this decade, profits abounded for the sub-prime lenders, Wall Street firms and bondholders alike, and scores of small companies sprung up to mine sub-prime gold. The lenders' profits have dissolved, however, as the housing market lost steam, rates moved higher and competition became brutal. Analysts now say there are far more such lenders than the market will support. One solution for these lenders is to sell. And starting last year, major bond houses such as Bear Stearns, Lehman Bros. and Morgan Stanley began purchasing struggling sub-prime lenders to ensure themselves a flow of mortgages for the bond pipelines.

Nowadays bond investors, along with potential buyers of mortgage companies, have become increasingly picky about the types of loans being made and the companies making them, analysts say. Consultant David Olson of Wholesale Access Mortgage Research & Consulting Inc., based in Columbia, Md., said people were finally waking up to the risks of foolish credit practices that had enabled dodgy borrowers to repeatedly refinance using loans with artificially low starting payments, or to take out "stated income" mortgages without having to prove they had enough income to repay them.Finding a buyer was especially tough for Ownit because its niche was particularly risky at a time when the housing-price boom had ended in many areas.Ownit specialized in 100% financing of home purchases to borrowers with low credit scores, often stretching the repayment time to 40 or 45 years. First-time homeowners with little or no equity are the first to default on loans they can't afford, said analyst Richard Eckert at Roth Capital in Newport Beach — a problem exposed when home prices stop going up.Ownit had agreed that buyers of its loans could force it to repurchase the mortgages if borrowers began missing payments in the early months. It then had to sell the loans at a loss to other, more speculative investors, analysts said.Dallas said his borrowers, many of them immigrant families with several wage earners, hadn't missed payments any more frequently than customers of other sub-prime lenders. But analyst Matthew Howlett at Fox-Pitt, Kelton, noting that sub-prime loans made in 2006 were becoming delinquent at a near-record pace, said investors expected Ownit to be among the companies hardest hit by bad loans. The potential liability made it impossible for Dallas, a 30-year veteran of the industry, to sell his company.Dallas had already built up and sold a larger sub-prime lender, First Franklin Financial Corp., when he teamed up in 2003 with Chicago buyout fund CIVC to acquire Oakmont Mortgage Inc. They paid $34 million for the lender and changed its name to Ownit.The timing of the acquisition came as the industry boomed, and Merrill thought enough of the company to pay $100 million for a one-fifth stake in Ownit in September 2005. That deal gave the initial investors triple their money back and implied that Ownit as a whole was worth $500 million.But last September, Merrill placed a different bet: It purchased First Franklin for $1.3 billion from Cleveland bank National City Corp. and walked away from its $100-million investment in Ownit.Merrill spokesman Halldin wouldn't discuss the specifics of Ownit's problems but said the Wall Street firm considered it unwise to spend more money to revive the lender. Halldin noted that Ownit's majority owner, CIVC, also had declined to invest additional funds.In addition to Ownit, several other national sub-prime firms have closed, among them Mortgage Lenders Network USA Inc., a Middlletown, Conn.-based lender that shut down Tuesday. And numerous sub-prime companies are reportedly on the auction block, including Irvine-based Option One Mortgage, a unit of H&R Block Inc., and ACC Capital Corp., the private holding company for Ameriquest Mortgage Co. and affiliates.Dallas said that as a last resort, he and CIVC offered to effectively give Ownit to Merrill Lynch if it would keep the lender in business. He said he was still not sure why that offer was rejected."I do not think this is the result they wanted," Dallas said.