LoanCentral's Real Estate Lending Blog

Crazy times in the lending business – reminiscent of the dot.com crisis a few years ago.

The entire mortgage industry is feeling the pressure from slowing home sales, intensifying competition and rising past-due loans. Higher delinquencies on subprime mortgages have (in recent months) forced a slew of lenders, big and small, to set aside more capital for potential loan losses.

Subprime loans, a term applied to some of the riskiest home mortgages, are made to borrowers with poor credit ratings or high debt burdens, often with adjustable interest rates.

As more subprime loans soured last year, lenders including Fieldstone and New Century Financial Corp. of Irvine, California have been losing money. About a dozen including Saxon Capital Inc. and ResMae Mortgage Corp. have sought buyers since 2005. A dozen more including Mortgage Lenders Network USA Inc. and Ownit Mortgage Solutions Inc. failed in the past three months.

Here’s a list of last years top 25 subprime lenders in the country along with a short status on where they are today…

Top 25 Subprime Lender list (Thanks to Implosion)
(As of 2006; from the Mortgage Banker's Association.)

Red are shutdown and/or bankrupt,

blue are no longer operating independently) –

2006 RANK	Lender	Comments	Status
1	Wells Fargo
2	HSBC Household Finance	HSBC's subprime unit - HSBC, Britain's biggest bank stunned the stock market by warning that misadventures in the US mortgage market have forced to it to write off up to $11billion	So far this year, they have already erased at least half of '06 earnings
3	New Century	New Century is now facing a veritable storm of lawsuits thanks to their (allegedly) misleading statements throughout 2006, which would have served to pump the share price and draw in additional investors.	funding pulled; lending halted, lawsuits, criminal probes, impairments
4	Countrywide	subprime to hurt results; layoffs	It follows New Century Financial Corp., Fremont General Corp. and General Electric Co.'s WMC Mortgage unit among large subprime lenders to announce staffing cuts this month.
5	Fremont General	Troubled subprime lender Fremont General said it will exit subprime residential lending, citing mounting pressure from loan repurchases and likely regulatory action.	prompted primarily by the receipt of a Proposed Cease and Desist Order from the FDIC on February 27 residential subprime activities ceased
6	Option One	H&R Block Inc. said Tuesday it will have to increase its quarterly losses for the third quarter because of the continued meltdown of the subprime market. In a securities filing, the nation's largest tax preparer said an ongoing review of its Option One mortgage arm forced it to write down the subsidiary's assets by $29 million, before taxes.	[H&R Block; mounting losses; up for sale]   H&R Block is looking to sell Option One, which has hemorrhaged money as the number of customers defaulting on their loans has gone up sharply.
7	Ameriquest	[ACC's formerly-major retail subsidiary]
8	WMC	[subsidiary of GE Money]
9	Washington Mutual	[some branch closures starting late 2006]
10	CitiFinancial
11	First Franklin	[acquired by Merrill Lynch from National City for $1.3bln]
12	GMAC	[Major layoffs in ResCap; Looming writedowns subprime loan portfolio and residual]	Residential Capital LLC, a real-estate financing company owned by General Motors Acceptance Corp., said it will eliminate 1,000 positions by October to reduce costs as the mortgage lender grapples with "the continued deterioration" in the subprime mortgage sector.
13	Accredited Home	[in a serious cash crunch]	The Company reported that it has paid approximately $190 million in margin calls on its facilities since January 1, 2007. Approximately two-thirds of those margin calls have been received and paid since February 15, 2007.
14	BNC	[Lehman bros. subsidiary
15	Chase
16	Novastar	[serious impairments; likely no dividends in 2007, no taxable income through 2011; shareholder lawsuits]	NovaStar Financial’s stock plunged 38% a day after the real estate investment trust became the latest casualty of rising problems in the subprime mortgage market. They reported a loss of $14.4 million, compared with a profit of $26.4 million a year earlier.
17	OwnIt	partially-owned by Merrill and BofA
18	MLN	Much of the sales force has gone to Lehman
19	EMC
20	ResMAE	[acquired by Citadel]	Citadel Investment Group LLC agreed to buy ResMae Mortgage Corp. for about $180 million, beating out Credit Suisse Group in a last-minute auction for the bankrupt mortgage lender.
21	Aegis		[recently closed two subprime operations centers]
22	FirstNLC
23	Decision One		[owned by HSBC; rumored to be up for sale]
24	ECC/ Encore		[fire-sale bought out by Bear-Stearns]
25	Fieldstone	bought by C-Bass	Fieldstone's stock had lost more than 40 percent of its value this year and 78 percent in the past 12 months. Shares of mortgage lenders have tumbled since the start of 2006 as late payments and defaults on new subprime loans in the U.S. reached their highest level ever, according to Bear Stearns Cos.