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By Rick Green
Aug. 23 (Bloomberg) -- Lehman Brothers Holdings Inc.'s shutdown of its subprime lending unit helped push the tally of mortgage companies that have halted operations or sought buyers since the start of 2006 to at least 100.
Lehman became the first of Wall Street's five biggest securities firms to close its subprime business yesterday when it shut BNC Mortgage LLC. The New York-based firm bought BNC in 2004 to expand lending to borrowers with weak credit.
Until last year, sales of mortgage companies fetched hundreds of millions of dollars, capped by Merrill Lynch & Co.'s $1.3 billion purchase of First Franklin on Dec. 30. Since then, 15 have gone bankrupt and about 50 have suspended loans or closed entirely. The total may be higher because some defunct firms didn't make public announcements or court filings.
``I don't think we are going to see the bottom for at least another six months,'' Edward Resendez, ex-chief executive officer of Resmae Mortgage Corp., said yesterday. Resendez sold Resmae to Citadel Investment Group at a bankruptcy auction. ``The lenders that are struggling out there are not going to survive. As soon as their liquidity runs out, they are going to go under.''
The industry slump pushed shares of mortgage companies down 58 percent from June 14, 2005, through yesterday, according to Bloomberg's index of mortgage real estate investment trusts, compared with a 22 percent gain for the Standard & Poor's 500 stock index. Among last year's 20 largest subprime lenders ranked by Inside Mortgage Finance, a trade publication, more than half have tried to sell themselves or left the business.
Late Loans
Overdue payments on U.S. subprime mortgages rose to the highest level since 2002 during the first quarter of this year, according to the Mortgage Bankers Association. That's made investors who buy mortgages reluctant to bid, driving down prices and cutting into the profit of home lenders.
Subprime loans are made to borrowers with poor credit ratings or heavy debts. The mortgages often charge higher interest rates to compensate for the greater risk of default.
The table below tracks sales, shutdowns, bankruptcies and transactions tied to home lenders. The list includes companies that may have offered subprime, prime or Alternative-A loans. The latter are an alternative for A-rated borrowers who fall just short of standards for regular prime mortgages.
Some of the most recent developments:
-- Accredited Home Lenders Holding Co. will close ``substantially all'' of its retail lending business and halt U.S. loan applications. About 1,600 people will lose their jobs.
-- Capital One Financial Corp. shut its GreenPoint Mortgage unit, eliminating 1,900 jobs.
-- Quality Home Loans, a California-based subprime lender, filed for bankruptcy.
-- Amstar Financial Holdings Inc., a Houston-based lender, said its mortgage division will cease operations.
PRICE
BUSINESSES SOLD PARENT BUYER ($ MLN) DATE*
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Centex Home Equity Centex Fortress 554(c) Mar. 06
Chapel Funding --- Deutsche Bank N/D May 06
Aames Investment --- Accredited Home 301 May 06
HomEq Wachovia Barclays 469 June 06
MortgageIT --- Deutsche Bank 430 July 06
Saxon --- Morgan Stanley 706 Aug. 06
First Franklin National City Merrill Lynch 1,300 Sep. 06
Encore Credit** ECC Capital Bear Stearns 26 Oct. 06
Irwin Mortgage** Irwin Financial Four buyers 261 Oct. 06
Irwin Mortgage** Irwin Financial New Century N/D Nov. 06
Champion KeyCorp HSBC, Fortress N/D Dec. 06
Millennium Funding Grp --- Roark Capital N/D Dec. 06
EquiFirst Regions Fin'l Barclays 76 Jan. 07
ABN Amro Mortgage ABN Amro Citigroup N/D Jan. 07
New York Mortgage(a) NY Mort. Trust IndyMac 14 Feb. 07
New York Mortgage(b) NY Mort. Trust Franklin Credit N/D Feb. 07
Senderra Funding**** --- Goldman Sachs N/D Mar. 07
ResMae Mortgage --- Citadel 180 Mar. 07
PHH Mortgage PHH Corp. Blackstone(e) N/D Mar. 07
SB Financial --- W.J. Bradley N/D Mar. 07
MortgageTree Lending --- W.J. Bradley N/D Apr. 07
Fremont(d) Fremont General Ellington --- Apr. 07
Lime Financial Services --- Credit Suisse N/D Apr. 07
New Century servicing --- Carrington Cap. 184 Apr. 07
Option One Mortgage H&R Block Cerberus Capital 800 Apr. 07
Opteum Fin'l retail Opteum Prospect Mortgage 1.5 May 07
Pinnacle Financial --- Impac Mortgage N/D May 07
Green Tree Servicing Fortress/Cerberus Centerbridge N/D June 07
First NLC Financial Friedman Billings Sun Capital 60 July 07
Winstar Mortgage** --- Am. Sterling Bank N/D Aug. 07
PARTIAL/POSSIBLE SALE PARENT DATE*
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ACC Capital assets*** ACC Capital Hld. Citigroup --- Feb. 07
C-Bass/Sherman Fin'l MGIC/Radian --- 750(g) Mar. 07
WMC Mortgage General Electric --- --- July 07
CIT home lending CIT Group --- --- July 07
Delta Financial --- Gordon / Pabrai --- Aug. 07
Luminent Mortgage --- Arco Capital --- Aug. 07
CUTS/CLOSED/BANKRUPT PARENT STATUS DATE*
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Acoustic Home Loans --- Halted applications Apr. 06
Ameriquest Mortgage ACC Capital Hld. Shut retail branches May 06
Meritage Mortgage NetBank Closed Nov. 06
Summit Mortgage Summit Financial Closed Nov. 06
Sebring Capital --- Closed Dec. 06
Ownit Mortgage Solutions --- Bankruptcy Dec. 06
Harbourton Mortgage Harbourton Capital Closed Dec. 06
Alliance Home Funding Alliance Bankshrs. Closed Dec. 06
Millennium Bankshares --- Closed mortgage unit Dec. 06
Popular Financial Popular Closed subprime unit Jan. 07
Bay Capital Clear Choice Fin'l Closed Jan. 07
EquiBanc Mortgage Wachovia Closed Jan. 07
Funding America LLC Ocwen Financial Closed Jan. 07
DeepGreen Financial Lightyear Capital Closed Jan. 07
Eagle First Mortgage --- Closed Jan. 07
Mortgage Lenders Network --- Bankruptcy Feb. 07
Lenders Direct Capital --- Halted wholesale loans Feb. 07
ResMae Mortgage Bankruptcy, revived Feb. 07
Central Pacific Mortgage --- Closed Mar. 07
FMF Capital LLC FMF Capital Group Closed Mar. 07
Silver State Mortgage --- License revoked Feb. 07
Ameritrust Mortgage --- Shut subprime unit Mar. 07
Master Financial --- Halted originations Mar. 07
Investaid Corp. --- Suspended Mar. 07
People's Choice --- Bankruptcy Mar. 07
LoanCity --- Closed Mar. 07
New Century Financial --- Bankruptcy Apr. 07
SouthStar Funding --- Bankruptcy Apr. 07
Peoples Mortgage Webster Financial Closed Apr. 07
WarehouseUSA NovaStar Closed Apr. 07
Copperfield Investments --- Bankruptcy Apr. 07
First Horizon National --- Halted subprime loans Apr. 07
Opteum Fin'l wholesale Opteum Closed unit(h) Apr. 07
H&R Block Mortgage H&R Block Closed Apr. 07
MILA(i) --- Bankruptcy Apr. 07
Texas Capital Bank Texas Cap. Banc. Closed mortgage unit Apr. 07
Millennium Funding Grp Roark Capital Halted originations Apr. 07
Columbia Home Loans OceanFirst Closed May 07
Lancaster Mortgage --- Halted wholesale loans June 07
Oak Street Mortgage --- Bankruptcy June 07
Starpointe Mortgage --- Closed June 07
Heartwell Mortgage(j) --- Halted retail/wholesale June 07
Wells Fargo --- Shut correspondent unit June 07
Premier Mortgage Funding --- Bankruptcy July 07
Alliance Mtg Investments --- Bankruptcy July 07
Wells Fargo --- Shut subprime wholesale July 07
Entrust Mortgage --- Halted loans July 07
Alternative Financing --- Halted wholesale loans Aug. 07
Trump Mortgage --- Closed Aug. 07
American Home Mortgage --- Bankruptcy Aug. 07
MLSG Home Loans --- Halted loans Aug. 07
Impac Mortgage --- Suspended Alt-A loans Aug. 07
Fieldstone C-Bass Closed Aug. 07
HomeBanc Mortgage HomeBanc Corp. Bankruptcy Aug. 07
Aegis Mortgage Cerberus(k) Bankruptcy Aug. 07
Regions Regions Fin'l Shut warehouse unit Aug. 07
Express Capital Lending --- Halted acceptances Aug. 07
Bay Finance Commerce Group Halted loans Aug. 07
First Indiana --- Shut wholesale unit Aug. 07
Guardian Loan --- Closed Aug. 07
Unlimited Loan Resources --- Halted loans Aug. 07
Pacific American Mtg. Golden Empire Halted wholesale loans Aug. 07
Thornburg Mortgage --- Suspended applications Aug. 07
National Home Equity National City Halted loans, merged Aug. 07
NovaStar Financial --- Halted wholesale loans Aug. 07
GreenPoint Mortgage Capital One Shut wholesale unit Aug. 07
First Magnus Financial --- Bankruptcy Aug. 07
First Nat'l Arizona 1st Nat'l Hld Halted wholesale loans Aug. 07
Quality Home Loans --- Bankruptcy Aug. 07
Amstar Mortgage Amstar Financial Closing Aug. 07
Accredited Home --- Halted loans Aug. 07
BNC Mortgage Lehman Brothers Closed Aug. 07
Notes:
-- Some names have been abbreviated for space. Companies listed
may have engaged in conventional, Alternative A or subprime
mortgage lending. Status of deals and companies, prices and terms
are subject to adjustment after the announcement date.
N/D Not disclosed or not available.
* Announced date, first known disclosure or effective date
if disclosed after completion. Some announced closings have
not yet been completed.
** Asset sale
*** Citigroup obtained an option to buy ACC Capital's
wholesale mortgage origination and servicing businesses.
**** Per Goldman Chief Financial Officer David Viniar 6/14/07
in conversation with reporters. Web site lists
company name as Avelo Mortgage LLC d/b/a Senderra Funding.
(a) Retail assets
(b) Wholesale assets
(c) Actual price before taxes, per 10-Q filing. Centex's
release cited after-tax proceeds of about $540 million.
(d) Residential subprime unit
(e) After sale of PHH Corp. to General Electric Co.
(f) Purchased in July 2007 for $188 million.
(g) Projected, after taxes, from partial divestiture.
See Page 41 of the MGIC Form S-4, March 19, 2007.
(h) Units served mortgage brokers and bought home
loans from mortgage bankers, thrifts, builders and
credit unions.
(i) Formally known as Mortgage Investment Lending Associates.
(j) Confirmed by company e-mail on July 5, 2007.
(k) Owners included Cerberus Capital Management LP. Retail
lending halted in June, wholesale lending in August.
To contact the reporter on this story: Rick Green in New York at rgreen18@bloomberg.net.
Last Updated: August 23, 2007 13:14 EDT
