Buybacks Sink Ownit Mortgage
After closing its doors almost a month ago, subprime lender Ownit Mortgage Solutions filed for bankruptcy protection in late December, saying it did not have enough cash to buy back $166 million in delinquent loans.
In the filing, the Woodland Hills, Calif.-based lender listed secondary market investors that had buyback requests with the firm - Merrill Lynch leading the pack, by far, with $93 million.
Merrill Lynch - which now owns First Franklin Financial Corp., San Jose, Calif., one of the largest subprime lenders in the nation - was a major warehouse provider to Ownit. When it pulled its lines over unresolved buybacks, Ownit closed its doors.
A former account executive at Ownit told MSN's sister publication, National Mortgage News, "There needs to be a public accounting for the actions of both Merrill and the top brass at Ownit."
Ownit was managed by industry veteran Bill Dallas, who also was a top executive at First Franklin. Mr. Dallas could not be reached for comment. Merrill Lynch declined to comment.
After Merrill, Terwin Advisors LLC was second with $19 million in buyback requests, followed by Credit Suisse ($13 million), J.P. Morgan Chase ($11 million), Countrywide Financial ($11 million) and GMAC-Residential Funding Corp. ($5 million).
A buyback occurs when an investor, citing "reps and warranties" demands that a funder repurchase a mortgage - usually because of early payment defaults.
Ownit's collapse is significant: not only is it a top 20 ranked subprime funder, but Merrill Lynch owned about 20% of the firm. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com