Seventh Edition - Covering 2005 Through 2007
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Seventh Edition - Covering 2005 Through 2007 |
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In case you're wondering, the entire U.S. subprime market did not burn to the ground in 2007. Okay, quite a bit
of the forest caught fire with dozens of subprime lenders (all non-depositories) closing their doors in late 2006 and
the first-half of 2007. Lost in all the smoke and flames is this one basic fact that should warm the hearts of the industry's
survivors: U.S. consumers with crummy credit still need mortgage money. And there's plenty of lenders out there willing
to extend credit — but at a price. Before we prognosticate about subprime's future (yes, there is a future), let's talk
about the A- to D production market in 2006 and where it's headed in 2007. According to exclusive survey figures compiled
by National Mortgage News for the Mortgage Industry Directory, U.S. subprime lenders of all shapes and sizes
(depositories and non-depositories alike) funded $665 billion in A- to D quality loans last year, a 16% decline from 2005.
In the overall residential market (all loan types) mortgage bankers funded $3.26 trillion in loans which is exactly
how many they produced the year before. By looking at the figures you could easily conclude that while the overall
residential loan market held up, subprime showed signs of weakness. "Weakness"— if that's not putting it nicely, then
I don't know what is. As we all know, the ugly truth about subprime is much worse: scores of lenders went bust,
consumer delinquencies are now rising rapidly, home values are falling and the production outlook is cloudy.
(More on the outlook for '07/'08 later.)
Our research shows that the subprime market — in terms of loans funded — peaked out in 2005 when a record
$795 billion in A- to D loans were funded. By comparison, 2006 really wasn't a bad year at all in terms of B&C fundings.
But the devil is in the details. Roughly, 50 subprime related firms went bust from December 2006 to June 2007.
And those are only the ones we know of, thanks to reporting by NMN, Origination News, MortgageWire American Banker,
and other publications.
The carnage in the U.S. subprime sector really did not begin, in earnest, until the fall of 2006, though it should
be noted that the first real crack in subprime's facade actually came in April of last year when Acoustic Home Loans,
a non-conforming wholesaler based in Orange, Calif., closed its doors after being in business for just three years.
Industry officials close to the company said the lender had large loan buy-back issues, adding to its financial woes.
It is not known which correspondent buyer was pushing the buy-back issue with the company but all the evidence pointed
to Bear Stearns & Co., which also may've been warehousing Acoustic. (The now-defunct lender was 80% owned by Metrocities Mortgage,
also of California, which had launched Acoustic as a way to enter the subprime wholesale sector. Metrocities formed Acoustic
as a separate business — thus insulating itself to some degree. In retrospect, it was a smart move by Metrocities, even though
it too later came under financial pressure and was forced to put itself up for sale.)
Read the full text in the paid version of the product.
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With comments or questions about the data contact Paul Muolo, paul.muolo@sourcemedia.com For technical support, e-mail Andras Malatinszky, andras.malatinszky@sourcemedia.com For customer service, call (800) 221-1809 © 2008 SourceMedia, Inc. and National Mortgage News. All rights reserved. |
