Ownit a victim of sub-prime shakeout
Ownit Mortgage Solutions, an Agoura Hills-based wholesale lender, has ceased operations and laid off 800 employees nationwide, part of the shakeout in the sub-prime lending business.
One employee, among 300 to lose their jobs in California, said he learned of the company’s demise Tuesday while manning the Ownit booth at a mortgage conference in Las Vegas.
“Suddenly, people were all rushing over and practically throwing their BlackBerries at me,” said Kevin Panet, a marketing and training manager. “The messages they were getting from people at the company said things like, ‘Thanks for the memories.’ ”
A statement released Wednesday by Ownit said funding had dried up for its sub-prime loans, which generally go to people who don’t meet the credit requirements of mainstream lenders.
Concerns over sub-prime lenders ratcheted up after a November report from investment bank UBS said sub-prime borrowers were falling behind on their payments at a record pace. Meanwhile, the housing market is slowing down and loan volume has shrunk.
“The small and mid-sized lenders that specialize in those loans have been facing a lot of pressure lately,” said John Bancroft, managing editor of Inside Mortgage Finance Publications Inc. in New York.
“These are companies that depend almost exclusively on new loans for their earnings. That market grew rapidly in the last 10 years, but it couldn’t last forever,” he said. “Eventually you reach just about every marginally qualified borrower you can.”
In its statement, Ownit blamed Merrill Lynch & Co. for the closure, saying the company was one of its primary lenders and had cut off its funding Tuesday. Merrill Lynch holds about 20% of Ownit.
Merrill Lynch spokesman Bill Halldin said Ownit’s statement was misleading, but he declined to comment further.
Two people with knowledge of the funding arrangement said JPMorgan Chase & Co. cut off Ownit’s funding Monday, leaving the lender unable to issue loans. JPMorgan couldn’t be reached for comment.
According to trade publication Origination News, Ownit ranked 11th among sub-prime wholesale lenders in the first half of 2006 with $5.5 billion in loans.
Ownit employees were permitted to return to the company’s offices Wednesday to clean out their desks.
Panet said he didn’t know how much pay would be coming to employees.
“I’ve been told not to expect anything as far as severance goes,” he said. “It’s not sure we will be getting a last paycheck on the 15th.”
Ownit executives wouldn’t discuss the shutdown beyond the company’s brief statement. It was also unclear what would happen to loans that were in process.
On Wednesday, the company’s website was taken down.