Mortgage Lending Network was unable to fund hundreds of loans they promised to make in the Northeast. Why is the reason I am bringing this up.
Mortgage Lending Network is a subprime lender that packages loans and moves them to Wall Street to sell. After they sell, Mortgage Lending Network then has the money to make the next round of loans.
But for the first time in recent memory, the loans did not sell on Wall Street. And if Wall Street has shut down on the subprime loans, there is some big trouble brewing out there for the low end builders and mortgage companies.
Mortgage Lending Network’s executive vice president, James Pedrick, yesterday attributed the cessation of the wholesale business to “turmoil” in the subprime market. In December, subprime lenders Ownit Mortgage Solutions of Agoura Hills, Calif., and Sebring Capital Partners LP of Carrollton, Texas, halted operations, according to Bloomberg News.
Subprime loans, typically made to people with poor credit ratings, are the majority of Mortgage Lenders Network’s business, Pedrick said. The firm has been unable to resell some packaged, subprime loans on Wall Street, he said. This apparently interrupted the stream of financing necessary to make the next batch of loans, brokers said, though Pedrick would not elaborate. via The Boston Globe.
If you are a buyer or seller and you are looking to close with a subprime loan in the near term, be very careful. If you are an agent, you may want to look into this a bit more if you are working a deal with financing that is not top level.
This may be a blip, I hope it is. But the whole subprime game has been predicated on Wall Street buying up the paper. If they stop, the rules will change in a hurry and another segment will be taken out of the market rather quickly.