Mortgage Lenders Network USA Inc. became the third company in a month to stop issuing loans as U.S. housing sales slowed and defaults by borrowers rose.The company, known as MLN, is “not currently funding loans or accepting new applications,” according to a statement on its Web site. Middletown, Connecticut-based MLN, which caters to borrowers with low credit scores, said it is “exploring strategic alternatives” for its wholesale unit, which typically means a company is seeking new backers or a buyer. MLN also handles billing and collections for $15.6 billion of loans.
Lenders including Ownit Mortgage Solutions Inc. and Sebring Capital Partners LP that specialize in “sub-prime” mortgages closed operations and cut staff in 2006 as more loans to high- risk customers soured. Nationwide, late payments on sub-prime loans rose during the third quarter to 12.56 percent of the total, the most since the first quarter of 2003, the U.S. Mortgage Bankers Association said.
“What you’re seeing is a shakeout as it relates to the lower-tier mortgage players,” said Rui Pereira, a managing director in the residential mortgage group at Fitch Ratings.
Ownit, based in Agoura Hills, California, and the 16th- biggest issuer of sub-prime home loans, filed for bankruptcy court protection last week. Sebring, of Carrollton, Texas, closed in December. Morgan Stanley bought mortgage lender Saxon Capital Inc. for $706 million early last month and announced plans to slash 170 jobs.
MLN opened a decade ago with seven people. It grew to employ 1,800 people as falling interest rates early this decade spurred record mortgage applications. As recently as Dec. 8, Chief Executive Officer Mitchell Heffernan said in a statement that MLN was “actively accepting loan submissions” and that the company “continues its growth and expansion.”
Heffernan and General Counsel Steve Olearcek didn’t return calls for comment.
Closely-held MLN is the 15th-biggest issuer of sub-prime mortgages, with $3.3 billion of loans in the third quarter, according to the industry publication National Mortgage News. Sub-prime mortgages are made to people with low incomes, a track record of missed payments or limited credit histories.
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