Industry News

New Jersey bank closes subprime unit

Employees allegedly concealed problems in 2006

A federally chartered bank in New Jersey closed its subprime lending subsidiary in March and fired employees who concealed "an onslaught of early payment default claims" in 2006 from its parent company, executives said. In a presentation to shareholders Thursday, executives at OceanFirst Financial Corp. said the bank made subprime loans through a subsidiary, Columbia Home Loans LLC, based in Westchester County, N.Y. Columbia's loans were securitized and sold to Wall Street investors, who had the right to demand that Columbia repurchase them if borrowers defaulted soon after closing on a loan. OceanFirst executives said a zero-down subprime loan offered by Columbia carried risks that were not sufficiently managed, resulting in "an onslaught of early payment default claims." The problem was exacerbated "by a concealment of the incidence of (early payment defaults) in 2006," the company said. "Concealed information remained suppressed by Columbia officers until February 20...