Lehman Brothers Holdings Inc. will finance loans that were closed but not funded by troubled Connecticut-based Mortgage Lenders Network USA Inc. while the company negotiates with potential buyers for its wholesale lending division, a company official said this week.
MLN President Mitchell L. Heffernan told the Hartford Courant that 880 of the company’s 1,900 employees in five states were furloughed after the company lost its sources of funding, and 100 workers were laid off.
A successful sale of MLN’s wholesale lending division — which relies on outside brokers to originate loans — would preserve the jobs of 200 employees in Connecticut, who would become employees of the new owner, Heffernan said. But MLN is also looking for $50 million to $70 million in outside capital, which could help it rebuild rather than sell its wholesale lending division, he said.
Either way, MLN intends to continue operating its $19 billion servicing business, and a smaller retail lending division in which loans are made directly to borrowers.
Heffernan said MLN, although concentrated in subprime lending, used sound underwriting standards. The company’s problems began, he said, when it had to sell hundreds of million in loans at a loss in October because they carried below-average interest rates. In December, MLN lost the lines of credit it needed to make loans the company sold to investors in the secondary market, the Courant reported.