13 Comments for this entry

1. John M. says:

   January 2, 2007 at 9:54 AM

   The above link seems to require (free) registration. I got in OK from Google News, but in the meanwhile here’s a sample from [1].

   Mortgage Lenders Network USA, a major issuer of loans to people with blemished credit histories, says it has stopped funding loans and accepting applications for new loans.

   MLN, which bills itself as one of the country’s top subprime mortgage lenders, also is “currently exploring strategic alternatives” for its wholesale business lines, according to telephone recordings at at least two of its wholesale lending offices.
2. John M. says:

   January 2, 2007 at 10:00 AM

   Here’s a list of earlier stuff. I’ll update this comment in place as I add more.

   ———————————–

   [2]: “MLN Faces Renewed Rumors of Shutdown”, by P. Jackson, HousingWire, January 1, 2006.

   [4]: “Another One”, financial reality blog, December 31, 2006.

   Top subprime lenders as of 2Q06, per the Mortgage Bankers’ Association [emphasis in original, Ownit supposedly 11th when it tanked, is this sector volitile or what?]:

   1. Wells Fargo
   2. HSBC
   3. New Century
   4. Countrywide
   5. Fremont
   6. Option One
   7. Ameriquest
   8. WMC
   9. Washington Mutual
   10. CitiFinancial
   11. First Franklin
   12. GMAC
   13. Accredited Home
   14. BNC
   15. ChaseHome Finance
   16. Novastar
   17. Ownit (gone)
   18. Aegis (just closed two subprime operations centers)
   19. MLN (going, apparently. update 1/1/2007 potential acquisition by a “major Wall Street player”)
   20. EMC
   21. ResMae
   22. FirstNLC
   23. Decision One
   24. Encore (being acquired by Bear, Stearns)
   25. Fieldstone (closing 7 of 16 ops centers, debt covenants modified thru 1/31/2007)

   [5]: “MLN…What’s going on??”, BrokerOutpost discussion forum thread, started December 29, 2006.

   Just “go home”? What are they supposed to do on Tuesday?
3. John M. says:

   January 2, 2007 at 10:09 AM

   I’ll put new stuff here.

   —————–

   [3]: “More subprime mortgage crack-ups”, by Mike Larson, InterestRateRoundup blog, January 2, 2006.

   The last time we saw several high-risk mortgage lenders fall like flies, it was 1998. The culprit was a seizing up in the secondary market for risky mortgage bonds related to the Long-Term Capital Management crisis and the Russian debt default. This time, liquidity is tightening up because subprime mortgages are performing terribly. And I’m not surprised by that — not one bit. The fact is, too much easy money was doled out on too easy terms to too many borrowers who had no business getting loans. This problem should continue to plague the markets for some time to come.

   [6]: “Credit is getting very tight”, by Crispy, BakersfieldBubble blog, January 2, 2007.

   Per their website:

   Mortgage Lenders Network, USA is not currently funding loans or accepting new applications through the Prime and Non-Prime Operating units. We are currently exploring strategic alternatives for the Wholesale Business Lines.

   [9]: “Mortgage Lenders Network stops loans, sets layoffs”, by Jonathan Stempel, Reuters, January 2, 2007.

   Mortgage Lenders Network USA, a large U.S. subprime lender, said it has stopped funding loans and accepting applications for loans, citing deteriorating conditions in the mortgage market, and has temporarily laid off about 80 percent of its 1,800 employees.
   …
   Roughly four-fifths, or about 1,440, of the Middletown, Connecticut-based firm’s employees are on “temporary furlough,” spokesman James Pedrick said in an interview.
   …
   Unlike most subprime rivals, Mortgage Lenders increased its lending throughout 2006. It made $3.31 billion of subprime loans in the third quarter, ranking 15th nationwide, according to data from National Mortgage News.

   The firm, however, said wholesale market conditions have “deteriorated dramatically” in the last two months.
   …
   Several Wall Street firms have made mortgage acquisitions in the last year, including Merrill Lynch and Morgan Stanley last month.

   [10]: “Mortgage Lenders Network Halts Loans as Housing Slows”, by Bradley Keoun, Bloomberg, January 2, 2007.

   Sub-Prime Shakeout

   Ownit, based in Agoura Hills, California, and the 16th- biggest issuer of sub-prime home loans, filed for bankruptcy court protection last week. Sebring, of Carrollton, Texas, closed in December. Morgan Stanley bought mortgage lender Saxon Capital Inc. for $706 million early last month and announced plans to slash 170 jobs.

   “What you’re seeing is a shakeout as it relates to the lower-tier mortgage players,” said Rui Pereira, a managing director in the residential mortgage group at Fitch Ratings.
   …
   In May, [Mortgage Lenders Network] broke ground on a 305,000-square-foot headquarters in Wallingford, Connecticut, in a ceremony attended by Governor Jodi Rell and the town’s mayor, William Dickinson. Heffernan said he planned to add almost 1,000 jobs in the state within the next three years.
   …
   The company told officials the project, which is now in early construction, would cost $60 million to $70 million, Dickinson said in an interview. MLN separately announced plans to open a 180,000-square-foot facility with 650 jobs in Phoenix and expand offices near Philadelphia and Atlanta.
   …
   Brokerage firms including Morgan Stanley, Barclays Plc and Deutsche Bank AG have been buying mortgage companies, including sub-prime lenders and servicing units, so they can repackage home loans into larger securities, which spreads the risk of default. The firms can then sell the securities to clients who want interest income. On Dec. 30, Merrill Lynch & Co. completed the $1.3 billion purchase of National City Corp.’s First Franklin sub-prime lending and servicing unit, National City said today.

   [11]: Mortgage Lenders Network USA stops funding loans: Subprime lender employs 1,800 nationwide, Inman, January 2, 2007.
4. twist says:

   January 2, 2007 at 10:35 AM

   John-

   Here’s an interesting rumor, reported to be from an MLN employee on Broker Universe Mortgage Grapevine:

   I am an employee of MLN and I am working today—the servicing end is not going anywhere, the events are very unfortunate-It has nothing to do with our subprime loans, the problem was our pricing on our A+++ product. What a horrible way to start 07—-I will keep those of you interested updated and informed of the TRUTH!

   It seems the bulk of the problem was NOT the 580 stated program, but the A++ pricing issue that surfaced in November. Those in charge of pricing were terminated, but ultimately we generated so much business at a pricing level that killed 3 months worth of expected profit. Word is that if we could have made it through the month we would have been okay…. Unfortunately that does not appear to be the case. As of now, wholesale has been shut down, and the hopes are that our Retail side will continue. I suppose we shall find out Tuesday. I loved working for MLN and wish I could continue. It it a great company, with quality people and good leadership….unfortunately they did not foresee the storm and could not right the ship. God bless everyone else in wholesale in all the regions, BDM´s, Conforming and Non-Conforming. To our Corporate underwriters and finance staff, best wishes that some of you will still be needed to help retail. It´s an awful way to begin the New Year.
   God Bless….

   It will be interesting to see how this affects the market, which is closed today.
5. NVmike says:

   January 2, 2007 at 10:37 AM

   Looks like another biggish sub-prime lender is trailing smoke.

   I do so enjoy a good turn of a phrase.

   Bravo!
6. John M. says:

   January 2, 2007 at 2:22 PM

   For the record, the earliest blog reference to this story seems to have been by Russ Winter in Ben’s Bits last Saturday.

   Comment by Russ Winter
   2006-12-30 07:14:53
   Rumors and scuttlebutt about another major mortgage broker shut down.
   http://forum.brokeroutpost.com/loans/forum/topic.asp?TOPIC_ID=81847&whichpage=2
7. John M. says:

   January 2, 2007 at 4:04 PM

   During the thread on MLN in today’s Ben’s Bits, commenter crispy&cole noted he was following this story almost four weeks ago.[7] Later in that thread Russ confirms Crispy’s priority as follows.

   Crispy had the mortgage broker scuttlebutt on the MLN story, which I then quickly wrote up on my blog. Still it is satisfying to beat the mainstream press to the story by four days. Guess that’s why we have bloggers, big grin.

   Crispy’s post was four days ahead of the only MSM story I could find that alluded to the issue prior to today.[8]

   ———————————–

   [7]: “Sub Prime Blowup? Looking at the latest postings on the Broker Outpost, one would think the Sub prime market is ready to blow up”, by Crispy, Bakersfield Bubble Blog, December 7, 2006.

   [8]: “TOP STORY: Ownit Looked For Investor Until Very End”, by Stephen Bernard, BankNet360, December 11, 2006.

   December is shaping up to be a low-point for nonprime lenders. Carrollton, Texas-based Sebring Capital closed its doors Dec. 1, laying off 325 employees. And Middletown, Conn.-based Mortgage Lenders Network USA was forced to release a statement last Friday announcing it was still in business after rumors of its imminent demise swirled through the industry late last week, according to a published report.
8. crispy says:

   January 2, 2007 at 7:53 PM

   Thanks for the notes.

   Until credit tightens, IMO, this bubble will never end.
9. John M. says:

   January 2, 2007 at 8:11 PM

   crispy -

   Thanks for dropping by. Didn’t know if Twist’s comment #4 above would have been on-topic at Ben’s, but what do you think of “MLN employee’s” theory for what went wrong?
10. twist says:

    January 2, 2007 at 8:15 PM

    Crispy-

    You shouldn’t (If Igor, our spam jailer behaves) be caught in moderation next time.

    You are right- a lot of air is out of the bubble, but it’s not dead yet.
11. crispy says:

    January 2, 2007 at 8:21 PM

    Theory? LOL. Dreaming?

    This is the 4th sub primer to go down in the last month or so (Sebring, HMIC, Ownit). There has to be more to the story than just a “pricing” issue. If its pricing then adjust the pricing??

    My guess (worth $0.00) is they had some big buy backs and we were unable to choke them down. That is what happened to the other guys.

    I did some work in the 90′s for some mtg guys and back then OVERNIGHT guys went out of business. Usually a result of their warehouse line going dry.
12. twist says:

    January 2, 2007 at 8:59 PM

    Crispy-

    By not dead I mean we have gone from “Irrational Exuberance” to “Irrational Hope.” There are rumors of tougher lending standards, but based on the mortgage offers I’m seeing, lenders are still writing a bunch of junk, and flippers think it’s a “buyers market.” Investors are still out there buying stuff. That’s the “stickiness” on the way down that we keep hearing about.

    It’s not dead yet- but it’s only getting by on life support.
13. John M. says:

    January 3, 2007 at 4:30 AM

    MLN seems to be hanging tough overnight.

    ———————–

    [12]: “Sub-Prime Lender Cutting Back: Mortgage Lenders Network To Shift Focus, Eliminate 100 Jobs In State”, by Kenneth R. Gosselnin, Hartford Courant, January 3, 2007.

    Mortgage Lenders Network, currently building a sprawling new headquarters in Wallingford, said Tuesday that it is changing the focus of its business and will cut 100 jobs in Connecticut.

    The company released few details, but some observers said the change – ceasing much of its residential lending to focus on servicing existing loans – represents a major shift for the 10-year-old company. Mortgage Lenders attributed the decision to the slowing housing market and rising defaults by borrowers.

    [13]: “Mortgage Lenders Network USA, Inc. Remains a Strong Retail Originator and Mortgage Servicer”, PRNewswire – source: MLN, January 2, 2007.

    Mortgage Lenders Network USA, Inc. (MLN) today announced that it continues to operate its highly rated servicing platform and retail franchise and will temporarily discontinue its wholesale operations.

    While MLN’s servicing platform remains strong, the economics of the wholesale mortgage market have deteriorated dramatically over the past two months industry wide, company officials said.

    “Until we see credit quality and margins return to acceptable levels we have determined that MLN needs to pause from wholesale broker originations,” said MLN President and Chief Executive Officer Mitchell Heffernan.

    MLN is the third largest non-prime, sub-servicer in the country with a current servicing portfolio of $17.8 billion and the company is currently involved in strategic negotiations with several Wall Street firms relative to MLN’s wholesale origination platform.

    [14]: “MLN puts wholesale mortgages on hold”, by Cara Baruzzi, New Haven Register, January 3, 2007.

    The downturn in the nation’s housing market has caught up with Mortgage Lenders Network USA, but company officials said construction will continue on its new corporate headquarters in Wallingford.

    MLN President and CEO Mitchell Heffernan confirmed Tuesday the company is temporarily halting operations in the wholesale mortgage market, in which MLN processes mortgages for non-MLN brokers nationwide.

    [15]: “Mortgage lender stops funding loans: Subprime market specialist exploring ‘strategic alternatives’ for wholesale business line”, by David Enrich and Lingling Wei, Dow Jones Newswires, January 3, 2007.

    MLN also has a big mortgage servicing arm, with a portfolio of more than $14 billion and more than 100,000 accounts, according to the company’s Web site. The status of the servicing business wasn’t clear.

    The decision by MLN to stop funding new loans, and to consider alternatives for its wholesale business, is the latest sign of an ongoing shakeout in the subprime mortgage industry. Late last year, for example, two subprime lenders, including Ownit Mortgage Solutions, shut down, citing “the current unfavorable conditions of the mortgage industry.”

    Some subprime issuers are facing liquidity problems as their so-called warehouse lenders withdraw credit lines. Among MLN’s warehouse lenders is GMAC’s residential-mortgage arm, ResCap. In mid-December, a ResCap spokesman said, “We have a relationship with MLN, which includes purchases of loans and warehousing. We continue to support MLN through these programs.”

    [16]: “MLN Video – Employees told to box and leave”, by Cripsy, BakersfieldBubble blog, January 2, 2007.

    [17]: “Lending Conditions Have ‘Deteriorated Dramatically’ “, by Ben Jones, TheHousingBubbleBlog, January 3, 2007.

    Comment by MortgageWarehouseMole
    2007-01-03 09:43:56
    Top 10 Subprime Mortgage Originators:
    Rank Organization Market Share (Q3 06)

    1. Wells Fargo 13.2%
    2. New Century 7.9%
    3. HSBC Finance 7.2%
    4. CitiMortgage 6.3%
    5. Countrywide 5.8%
    6. Fremont Invest. 5.6%
    7. Washington Mut. 4.5%
    8. First Franklin 4.4%
    9. Ameriquest 3.8%
    10. Option One 3.7%

    [18]: “State banking officials investigate mortgage lender”, AP / Hartford Courant, January 3, 2007.

    State banking regulators are investigating the viability of a mortgage lender that has brokered billions of dollars in mortgages to people with poor credit histories, after it stopped funding loans and accepting new applications.

    Middletown-based Mortgage Lenders Network USA laid off at least some of its employees this week, said James Heckman, spokesman for the state Department of Banking. Investigators are looking into the company to see “that they’re still able to conduct their business,” he said.

    Bank investigators acted after receiving tips, Heckman said. He would not disclose what information the tips conveyed, but said officials learned that the company laid off workers on Tuesday.

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