Merrill Forces Margin Calls on B&C Clients

Merrill Lynch & Co. -- which has been stung by two high-profile subprime bankruptcies in six weeks -- is conducting margin calls on certain B&C originators that receive financing through the firm's warehouse group.The margin calls, which require that these lenders post additional capital, were confirmed by two mortgage bankers and a spokesman for Merrill. The spokesman noted that margins calls are "something we do on an as-needed basis." He declined to quantify the margin calls. Merrill, which recently bought First Franklin Financial, a top-ranked subprime funder, has provided warehouse financing to several large nondepositories, including the now-defunct OwnIt Mortgage Solutions of California and Mortgage Lenders Network USA of Connecticut. Merrill is an unsecured creditor to both these bankrupt wholesalers. One warehouse executive said Merrill "is being super-aggressive on margin calls. After what happened on MLN and OwnIt they are under a lot of pressure." One California executive said Merrill's actions are fueling what he called a "liquidity crisis" in the subprime funding niche.