New Century Financial to shutdown home lending unit New Century Financial is shutting down it's home lending unit (which it was shopping around for sale. Surprisingly no one seemed to think that jumping into the sub prime market was a good idea right now). The firings will take place tomorrow. This is on top of the 3,200 already let go. This means that New Century Financial will let go 70% of it's work force.


Related Article at Bloomberg
New Century Shuts Lending Unit as No Buyers Emerge (Update2)

Labels: Newcentury., NewCenturyFinancialCorp, Subprime, subprimeloans, subprimemortgagelending

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1/3 of all ARMs in California will end in forclosure One of the things I love is little tidbits that sometimes get buried in articles about the implosion of the sub prime market. This article is about how lawmakers are blaming mortgage bond investor should be held liable for deceptive loans. Well there is plenty of blame to go around for the sub prime market (starting with Alan Greenspan's decision to keep the prime artificially low). But four paragraphs in we get this little tidbit

Economist Christopher Cagan projected about a third of all adjustable-rate loans originating from 2004 to 2006 will default because of reset, when the initial "teaser rate" expires and borrowers must start making regular payments that include principal, he said in a study by First American CoreLogic released last month.
While many consumer and civil rights groups want government intervention, not everyone is pleased about any legislation costing taxpayer dollars.

"People have bought houses they can't afford, period," said Christopher Thornberg, economist and principal of Beacon Economics. "So unless the government is going to give them $100,000 to $200,000 each, what option do they really have?"

Given that sub prime East Bay borrowers who are sixty days late have risen from 4.29 to 12.23 percent, that rate adjustment is going to come as a complete shock.

The problem is of course is that there isn't a clean happy solution to the sub prime borrowing situation. It's going to end in foreclosures, tighter lending standards and an overall tightening of credit.

Labels: CAMortgageNews, EastBay, EastBaySubprime, forclosure, novastar, refinance, Subprime, subprimeforeclosure, subprimemortgagelending

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Ownit - California sub prime lender closes 800 laid off Ownit Mortgage Solutions, a California company that described itself as one of the top 15 lenders to homeowners with weak or no credit histories, has shut down, citing "the current unfavorable conditions of the mortgage industry."

Merrill Lynch & Co. (MER) and private equity firm CIVC Partners hold stakes in Ownit, which built its book of new loans to $8.3 billion in 2005 from $1.1 billion in 2003, in part by introducing products like 45-year mortgages, according to its Web site. Ownit's demise comes as subprime mortgage lenders are being squeezed by higher funding costs, weakening loan demand and rising delinquencies.
"Effective Dec. 5, Ownit closed its doors, and we are no longer able to fund or process your loans," the company said on a recorded telephone message. "We apologize for any inconvenience."

Ownit ran out of cash needed to meet its obligations to repurchase loans from investment banks and others who bought them in the secondary market, people in the industry said. The banks, which convert the loan payments into mortgage-backed securities for sale to investors, can force the original lenders to repurchase loans if the mortgage borrowers default.

Bruce Dickinson, Ownit's chief operating officer, said he couldn't immediately comment pending discussions with lawyers.

In a letter to mortgage bankers and other business associates emailed Dec. 5, Ownit said, "For the past three years, we have pursued a mission to influence the mortgage industry toward increased affordability options for a changing market of home buyers. Change takes time, and we are saddened that the current unfavorable conditions of the mortgage industry did not afford us sufficient time to see our mission through."

Worsening conditions have pushed many owners of subprime mortgage firms to try to sell the businesses. Morgan Stanley (MS) bought Saxon Capital Inc. for $706 million earlier this month and Merrill plans to complete its $1.3 billion purchase of First Franklin Financial Corp., a large subprime lender that is owned by Cleveland-based National City Corp. (NCC) in the next few weeks.

National City bought First Franklin, which together with affiliates has $29 billion of mortgage loans, from its founder Bill Dallas, who went on to become chief executive of Ownit. Dallas didn't return a call for comment.
Merrill is believed to own about 20% of Ownit. A Merrill Lynch spokeswoman declined to comment. CIVC Partners, a Chicago-based private equity firm, also has a stake in Ownit and was an investor in First Franklin before Dallas sold it to National City. CIVC's Dan Helly, who oversees the Ownit investment, didn't return a call for comment.

The end came quickly for Ownit. "We were all working yesterday, assuming we were fine," Dave Hanthorn, a New Jersey-based employee who sells the firm's loans to mortgage brokers, said Wednesday evening. "At 5:15 last night we got the call that we were ceasing operations." He said the company gave no explanation for its funding problems.

Ownit laid off all its staff, according to a headhunter, who received an email that was reviewed by Dow Jones from a friend who worked at the firm. A voicemail message at the number of LesLee Delaney, a representative of Ownit in California, said the company will help mortgage brokers and other wholesale customers try to get their loans transferred to other lenders.

Labels: Ownit, Subprime, subprimemortgagecalifornia, subprimemortgagelending

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Regulators Begin to feel uncomfortable Apparently bank regulators have issued new guidance to banks about home equity loans, warning them about homeowners borrow too much against their homes. Of course the impact on these practices is almost non existant.

"It's as easy to get these loans now as it was two months ago," said Michael Menatian, president of Sanborn Mortgage, a mortgage broker in West Hartford, Conn. "If anything, people are offering them even more than before."

Apparently guide lines have only been issued without concrete action. Why?

"We don't want to stifle financial innovation," said Steve Fritts, associate director for risk management policy at the Federal Deposit Insurance Corporation. "We have the most vibrant housing and housing-finance market in the world, and there is a lot of innovation. Normally, we think that if consumers have a lot of choice, that's a good thing."

In many ways this is a good thing as it allows competition for a borrowers business. This means a financial windfall for the consumer by tapping the equity in their home.

Led by the comptroller's office, which oversees nationally chartered banks, federal banking regulators published guidance in May that gave lenders more detailed instructions on how to evaluate the risks in home-equity loans.

The move was a warning shot to lenders. The value of home-equity loans shot up 40 percent in 2004, to $398 billion. Almost all of those loans are at adjustable interest rates, which could rise sharply, and many were extended to people who had just borrowed money to buy a house.

If you have a hybird ARM or an ARM it's time to think about refinance.

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