Wednesday, January 10, 2007

Subprime Lenders Dropping Like Flies

With investors withdrawing funding or demanding bad loans be made good, combined with a number of states across the U.S. passing laws to crack down on predatory lending, several subprime mortgage lenders have closed their doors in recent weeks. Among the closures -- Ownit Mortgage Solutions Inc., Sebring Capital Partners and Harbourton Mortgage Investment Corp. The Los Angeles Times reports that Ownit Mortgage filed for Chapter 11 bankruptcy in December after Wall Street investors demanded it repay more than $165 million in delinquent loans. In addition, Mortgage Lenders Network USA has stopped funding loans and placed about 80 percent of the employees in its wholesale lending operation on furlough. It is still serving its $17.8 billion loan portfolio, the company reported.

Minimal requirements for obtaining a loan from many of these lenders have seen a flood of high-risk borrowers obtaining loans they have a difficult -- if not impossible time -- paying back. Street talk indicates that other independent subprime lenders who depend on Wall Street for financing will face similar pressures.

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