Mortgage Lenders Network USA Inc. has stopped funding loans and placed about 80 percent of the employees in its wholesale lending operation on furlough, but will continue to service its $17.8 billion loan portfolio, the company said in response to media reports that it was closing.
MLN’s servicing platform remains strong, the company said in a statement, but “the economics of the wholesale mortgage market have deteriorated dramatically over the past two months industrywide.”
MLN has temporarily discontinued wholesale originations and is involved with “several Wall Street firms” about its wholesale mortgage origination platform, the company 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.
In a Dec. 8 press release, MLN said it employed 1,800 workers, including 950 in
Several mortgage lenders have closed their doors in recent weeks after investors withdrew funding or demanded that they repurchase bad loans, including Ownit Mortgage Solutions Inc., Sebring Capital Partners and Harbourton Mortgage Investment Corp.
Ownit Mortgage chief executive William Dallas said the Agoura Hills, Calif.-based lender was forced to file for Chapter 11 bankruptcy last month after Wall Street investors demanded it repay more than $165 million in delinquent loans, the Los Angeles Times reported today.
Merrill Lynch & Co., which purchased a one-fifth stake in Ownit in September 2005, turned down an offer to take control of the company when it got in trouble, Dallas said. Merrill Lynch has acquired another subprime lender, First Franklin, paying Cleveland-based National City Corp. $1.3 billion.
Ownit’s reliance on 100 percent financing with terms of up to 45 years terms apparently scared away other potential buyers, because of the lender’s obligations to buy back mortgages in early default, the Times reported.
Other independent subprime lenders who depend on Wall Street for financing will face similar pressures, Dallas said, predicting, “This is going to end badly” for the industry.
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