Another subprime lender down? (rumor)

[IONEGARM]

http://www.mlnusa.com

Rumor around the campfire is they just have gone belly up.

“Company Description:
MORTGAGE LENDERS NETWORK USA, INC. Mortgage Lenders Network USA, Inc. (MLN) located in Middletown, CT, has grown quickly to become the 20th largest Alt A/non-conforming lender in the country. Our phenomenal growth is built on a foundation of outstanding leadership and uncompromising quality, and has created the need to expand our organization. MLN, a privately held Company specializes in Alt A/nonconforming and conforming product. The Company’s strategy is to offer a competitive product and outstanding service at a low cost. “

[MaxedOutMama]

Yes, that’s correct. They faxed out notices late today that they would no longer be funding residential mortgage loans. It’s not clear if loans still in their rescission period will fund.

The rumors were flying all today, because they had cancelled some closings. But even their own people didn’t get the word until late in the day.

This is the outfit that cut compensation to their Account Execs by 75% earlier in December.

On edit: This was ranked the 13th subprime lender in 2006; Ownit was 11th.

[Anonymous]

MaxedOutMama – do you have a list of the subprime lenders that you refer to? Could you post who the top 20 subprime lenders are? It would be interesting to see the list for 2006. Thanks, if you have it available.

[MaxedOutMama]

In order from top to bottom:
1 New Century
2 Fremont (FMT – industrial bank, big in commercial as well – but check out its 3rdQ financials and see the swing in securitization of residential mortgages. It’s quite something.)
3 Option One (owned by HR Block, up for sale)
4 WMC Mortgage (owned by GE under GE Money)
5 First Franklin (Merrill buying from Nat City for 1.3 bil)
6 Ameriquest (Argent, major lawsuits)
7 Decision One (owned by HSBC)
8 BNC Mortgage (op. subsidiary of Lehman)
9 Accredited Home Lenders (look at its quarterlies)
10 Countrywide Financial
11 Ownit Mortgage (partially owned by BofA)
12 Washington Mutual
13 Mortgage Lenders Network USA (MLN)
14 ResMAE Mortgage
15 NovaStar Mortgage
16 Chase Home Finance
17 Encore Credit
18 Wells Fargo Home Mortgage
19 Fieldstone (lost 45 million in 3rdQ)
20 Aegis Mortgage Corporation

These rankings are published by New Century but I think they are quite accurate.

[Anonymous]

Thank you, very kind of you to type these all in – it promises to be interesting to see what the list looks like for 2007. Best regards and Happy New Year!

[MaxedOutMama]

Happy New Year!!

You might be interested in Ownit’s BK filing; they say they owe 170 million and have assets of 10 million or so. It’s a big loss for Merrill, which has the biggest repurchases, not to mention losing its 20% stake:
http://www.latimes.com/business/la-fi-ownit30dec30,1,2686895.story?coll=la-headlines-business&ctrack=1&cset=true
Merrill Lynch demanded that Ownit repurchase mortgages totaling $93 million. Several other Wall Street firms are seeking smaller amounts, and Calabasas-based Countrywide Financial Corp. has $11 million in loans it wants Ownit to buy back.

Merrill Lynch was Ownit’s chief backer on Wall Street, having bought a 20% stake in the company for $100 million in September 2005.

[powayseller]

So Ownit sold their loans to Merrill Lynch, Countrywide, and others? Am I understanding this correctly? Why would Countrywide, a loan originator, buy other companies’ loans?

Do you know why the lenders are so slow to reduce the listings prices of their REOs? A Poway house on Twin Peaks Road has been bank-owned, according to the sign on the lawn and foreclosure.com, since August 2006. Why doesn’t the lender just lower the price enough to sell the house? When the house finally sells at a loss, who writes it off on the books – the lender or the MBS purchaser, and/or the pension fund/fixed income fund which owns it?

On a related note, how many people on this forum are sure that their pension funds and parents’ fixed income funds are safe from the demise of the MBS market?

[MaxedOutMama]

Powayseller, FNMA buys other originators’ loans and other originators’ MBS and ABS.

Most of these loans were probably bought for the purpose of packaging them into securities. The purchase agreements generally include provisions that require take-backs for loans that default quickly, and there is no time limit for fraud/impropriety. Fraud and impropriety is generally not picked up until first default.

One reason why one originator might buy whole loans or packaging rights on another’s loans is to get a better geographic or terms mix which will be used to reduce the overall calculated risk in the final securitizations and thus enhance the price of the entire package.

MLN also serviced, and they may have retained servicing rights but sold the loans on some of these.

[MaxedOutMama]

I almost hesitate to write this, but as for REO’s –

Suppose a place has a lot of REO’s, and sells them at large reductions in a particular area. Suppose they are also actively underwriting in that area. Suppose, for example, that in one area I sold 100 SFR at a median of $230,000 in the space of two or three months, and during the same two or three months I underwrote 450 SFR loans in that area at a median of $275,000. On later inspection, that might raise substantial questions.

The main problem is the refis. If you can’t support the needed refi amount with an appraisal, no loan, no fee, no business.

For any institution holding whole loans in one area, having to sell a bunch of REO at large discounts in that area undercuts their own collateralization. But for originators, it also raises some questions when the REO count gets high enough.

Automated valuation systems are already beginning to kick out more refi appraisals, and there is probably a valuation bomb in the pipeline in 8-12 areas.

For an inside look at appraisal problems:
http://forum.brokeroutpost.com/loans/forum/2/82006.htm
“This type of request is almost typical of most California brokers/lenders. They have an almost adament attitude that the appraiser MUST hit their value or they don’t get the assignment.

I had another one call me up the other day. First off, I told him that his request was highly illegal for any appraiser to accept as it was written. First off, instead of just saying “ESTIMATED VALUE” it said “VALUE NEEDED”. It went on to say “IF UNABLE TO GIVE THE VALUE LISTED ABOVE PLEASE CALL THE LOAN OFFICER ASAP”. All of that was preprinted on the form. He continued in his own handwritting, “PLEASE CALL ME TO SET THE APPT. IF THE VALUE IS THERE”. When I told him I could not guarantee of hitting his number (after I clearly told him I didn’t want him to put a number on his request when he first called) he hung up on me. The company name was NATIONWIDE WHOLESALE LENDING out of Woodland Hills, CA.

This is how I would say 90% of the calls I get from California goes.”

[TheBreeze]

Thanks for linking to that site, MOM. Lots of good stuff there, including this thread which provides a little more detail on the MLN situation:

http://forum.brokeroutpost.com/loans/forum/topic.asp?TOPIC_ID=81847&whichpage=1

[MaxedOutMama]

Over the weekend MLN people were supposed to be meeting with Lehman reps about the possibility of a buyout.

MLN also services.

Link to Grapevine reports.
http://www.brokeruniverse.com/grapevine/thread/?thread=342085

It’s also true that Fieldstone has only got shortterm funding.

[heavyd]

Here’s a bit more detail on what’s happening at MLN, from Bloomberg News:

http://www.bloomberg.com/apps/news?pid=20601206&sid=a1twH.bj1_q8&refer=realestate

And has anyone posted on this Lennar news today? Again, from Bloomberg News:

http://www.bloomberg.com/apps/news?pid=20601206&sid=aAGUoUkmKN8I&refer=realestate

HD

[Anonymous]

A friend of mine told me that his firm is representing a subprime mortgage originator in trouble. I didn’t want to know the name, nor would he have given it to me if I did, but it’s a top 50 (but not top 20) originator with over $40 million in equity and a few billion dollars in originations per year in recent years. This week Merrill exercised their option to put over $140 million of loans back to the company that met the criteria for the put (probably early defaults) and did not renew the company’s warehouse line. If Merrill’s putting loans back to the company, there are almost certainly others that will follow suit. Merrill’s puts alone would probably wipe out the company’s equity; a few more and the company’s BK. Also, I’d imagine that Merrill’s doing the same thing(s) to their other originators.

This market’s about to freeze up – it’s going to get ugly very quickly.

[MaxedOutMama]

Secured Funding is closing up its wholesale ops – they are accepting no new apps and they will fund the last loans on Jan 12th.

A lot of the lenders are pulling back on 100% stated purchases, at least.

I think these changes will have a real effect on some very inflated markets. There’s no way to qualify most borrowers using real numbers.

[MaxedOutMama]

Another one? http://forum.brokeroutpost.com/loans/forum/2/84090.htm

This one’s not large, but note the point about the terms. The industry is rapidly shutting down 100% stated purchases.

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