Lenders curtail or halt funding
The near collapse of the market for securities backed by sub-prime loans has sent aftershocks into the broader mortgage market, pressuring some companies to curtail their lending or stop making loans altogether.
Irvine-based Impac Mortgage Holdings Inc., whose executives have complained about being lumped with struggling sub-prime lenders, suspended the funding of alt-A mortgages Tuesday.
Such loans -- Impac’s chief product -- are not as risky as sub-prime but also aren’t worthy of so-called prime status.
Impac said it would fund only those loans eligible for sale to government-sponsored entities such as Fannie Mae and Freddie Mac. The company also has cut expenses and workers nationwide.
“While this is a difficult and painful decision, we believe that it’s a prudent strategy in light of the current business environment,” Impac Chairman Joseph Tomkinson said in a statement.
Typical Impac borrowers include self-employed workers who have decent credit but do not qualify for prime lending rates because their income may be seasonal or irregular. In a filing in March, the company said 91% of the loans it transferred to its portfolio last year were alt-A mortgages.
Impac said it was meeting margin calls -- demands by creditors for more collateral -- but its shares fell 36% to $1.09 on Tuesday morning before trading in the stock was halted.
Also Tuesday, privately held Aegis Mortgage Corp, which is based in Houston, said it had stopped accepting loan applications and could not fund all its obligations.
And the shares of Philadelphia-based RAIT Financial Trust, whose investment portfolio includes $4.3 billion in mortgage loans, fell 23% on concerns over its exposure to American Home Mortgage Investment Corp. On Monday, Melville, N.Y.-based American Home, which also made alt-A loans, filed for bankruptcy protection after Wall Street lenders cut off funding.
Standard & Poor’s said Tuesday that it might downgrade about $914 million of securities backed by alt-A mortgages. The credit-rating firm cited rising delinquency rates on the loans.
The mortgage mess also has created bargains ripe for the picking.
Countrywide Financial Corp. said Tuesday that it would buy five retail mortgage branches from Atlanta-based HomeBanc Corp., which is no longer funding loans or taking mortgage applications.
Countrywide, the largest U.S. mortgage lender, said it was not paying a cash premium for HomeBanc’s assets. Countrywide shares rose 60 cents to $27.35.
Banks worldwide are scrambling to reduce their exposure to U.S. residential borrowers.
Seattle-based Washington Mutual Inc. said it was tightening standards on loans that feature limited documentation.
Swiss banking giant UBS said Tuesday that it would buy mortgages only if the borrowers documented their income and supplied other important information, according to a memo obtained by Reuters.
