State Dominates Subprime Mortgage Lending in U.S.
The Golden State has become the lend of plenty.
Of the top 10 subprime mortgage lenders in the U.S., seven are based in Southern California, according to a report released Monday by the Mortgage Bankers Assn.
What’s more, of the $276.3 billion in subprime loans originated in 2003, nearly a quarter, or 22.6%, went to borrowers living in California, the association said. The state with the next largest share was Florida at 7.7%.
Subprime loans are made to borrowers who don’t qualify for prime rates because of credit problems. Lenders often charge slightly higher fees, or points.
Lenders have carefully cultivated the market of borrowers with less than perfect credit. Television and e-mail ads trying to persuade such consumers have proliferated.
Over the last year, mortgage rates have hovered near 40-year lows, making it less expensive for people to finance a home purchase or refinance an existing mortgage. That helped make 2003 one of the best years for the lending industry, which originated $3.8 trillion in home loans and refinances.
Because housing prices in California tend to be higher than in other states, loan amounts are higher too. The median price of a single-family home in California as of August was $474,000, the California Assn. of Realtors said.
As a result, Southern California’s robust subprime loan business spiked. Leading the list of top subprime lenders in 2003 was Irvine-based New Century Mortgage, a unit of New Century Financial Corp., which originated more than $23.9 billion in single-family loans, or about 8.7% of the U.S. subprime market based on dollar volume.
Also on the top 10 list was Orange-based Ameriquest Mortgage with 6.9% of the U.S. total; Irvine-based Option One Mortgage with 6.5%; Fremont Investment & Loan, a unit of Santa Monica-based Fremont General Corp., with 4.9%.; Anaheim-based Long Beach Mortgage with 4.2%; Pasadena-based Full Spectrum Lending with 2.7%; and WMC Mortgage Corp., a Woodland Hills-based unit of General Electric Co., with 2.6%.
