Orange County Register

Destruction has its upside.

Carnage, mortgage industry carnage that is, has strongly benefited one company: Las Vegas-based Implode-Explode Heavy Industries, Inc., the parent of the Mortgage Lender Implode-O-Meter Web site that keeps a running total of lenders gone bust.

Aaron Krowne launched ml-implode.com in January 2007 just as subprime lenders began failing in big numbers. As investors shunned all types of riskier mortgages, the pace of company failings increased throughout the year and expanded beyond subprime. Last week the site listed more than 260 mortgage companies that have “imploded.”

Mortgage Insider quizzed Randall Marquis, senior editor for the site who works on it from his home in Costa Mesa, about the carnage and what the company plans for when the bleeding stops. In addition to working on the site, he has brokered loans in California and Nevada for 20 years. (He declined to provide a photo.)

Q. What has to befall a lender for it to be listed on your site?

A. We have a very carefully worded disclaimer half way down the page. When we put someone on the list, it is serious.

(Editor’s note: The disclosure says, “The ‘imploded’ status is somewhat subjective and does not necessarily mean operations are ceased permanently: it can mean bankruptcy filing, temporary but open-ended halting of major operations, or a “firesale” acquisition. The companies include all types (prime, subprime, or a mix of both; retail or wholesale; subsidiaries and entire companies). Note: Companies listed here may still be operating in some capacity; check with them before making assumptions.”)

Q. Is the worst of the lending industry carnage behind us?

A. There are a lot more companies that are going to be on the list. We are expanding the list on the front page to include Europe, the UK and all the way to Australia. The implosions in some of these countries are just starting to happen.

From January on of this year there has been a 3 to 1 ratio: for every company you see on the Implode-O-Meter, there are three more that have gone down that we haven’t reported on because they are under our threshold of $20 million a month in loan funding. It’s just a shame that nobody hears about them.

The problem stems from the fact that there is no secondary market left and in fact even portfolio loans, loans that are made by the banks and held by them, are at a standstill.

Q. What do you mean by standstill exactly?

A. For example, many banks aren’t funding any loans they would normally hold, meaning the portfolio loans. Considering the current state of losses and write-downs, the reserve requirements on lenders are such that they can’t afford to fund their own loans and hold them. They are only pushing saleable product, meaning either government or agency paper.

Q. Have government initiatives — such as expanding loans insured by the Federal Housing Administration or the size of loans that can be acquired by government sponsored buyers — helped?

A. It can take six months right now to get FHA approval for your brokerage shop if you don’t already have it. Many brokers aren’t approved, and if you do want to put in for approval there is a backlog. Not all brokers can qualify. You have to put up $62,000 to $250.000.

The jumbo-conforming program (loans between the old limit of $417,000 and new one of nearly $730,000) hasn’t worked. Borrowers aren’t accepting it. There is such a small dribble that goes through there, it is a joke.

(Editor’s Note: Marquis explained that loans above $417,000 and up to the new limit are being offered at interest rates only about a quarter of a percentage point higher than loans up to $417,000, which generally have the best rate available. For example, one day last week conforming was at 5.75 percent and jumbo-conforming was 6 percent – those are “par” pricing, meaning the basic rate which could change depending on fees paid by the borrower. However, he said few people qualify for the higher loans because they don’t have enough income or downpayment, considering that these are ‘full-doc’ loans – borrowers have to prove their income and assets.)

Q. Let’s talk about the Web site. How many clicks does it generate?

A. Between the forum and the site, around 350,000 page views a day.

Q. What about unique visitors?

A. Around 70,000, but that’s down from 100,000. That decline is from attrition. Every time a company goes out of business we lose some readers.

Q. Are lots of people feeding you tips?

A. I’d say we probably get about 100 emails a day with tips. This is truly driven by the mortgage community.

Q. What’s your policy on anonymous sources?

A. Our sources are not anonymous to us.

Q. But you write stories without disclosing the names of sources?

A. We do not disclose anybody’s name or email address. And we have gained the trust of the community.

Q. What was your biggest scoop?

A. Michael Jackson’s foreclosure process (Neverland Ranch). We broke that news. We took that and published it and then placed a call to Gillian Sheldon at TMZ. They ran with it.

Right now we are working with a major media outlet on an investigative piece, a poster child of what went wrong with the whole system.

Everything on there is a big scoop. Family First Mortgage was a terrible train wreck. In many ways, we are reporting the train wrecks.

Q. What’s Family First?

A. A net branch operation down in Florida. … I was given a tip to call a number, and I called it, and basically it said, ‘You are fired. We are too busy handling people we are keeping.’ I posted the audio. I understand that according to Florida labor law, that was an illegal way to fire people.

We try to work with people damaged in the industry, from trying to get around the Worker Adjustment and Retraining Notification act to exposing some of the worst players in the industry and who you should or shouldn’t work for. Many people wake up and get a coffee and see if they should go to work that day (by checking the Web site).

Q. What’s the long-term plan for the site? Eventually the market will rebound and lenders stop imploding…

A. Nonimploded lenders (ml-implode.com/nonimp) is on the site right now. We are grading them across every state in the nation. When a lender asks to be put in the system, we take our site intelligence and by allowing them to be on that list it is almost like a tacit endorsement that they are players. If we get word through the grapevine that they shouldn’t be there, we remove them.

On the site, we have Top Non-Imploded. They pay for that. We took one lender off, and we got a letter from its attorney saying we had to put them back on and we had to keep their money.

Q. Did you put the company back in the Top Non-Imploded and keep the money?

A. No. We get a lot of communications from attorneys when we post something. We have spent more than $50,000 in legal fees defending our right to free speech in the past year.

Q. I’ve heard founder Aaron Krowne has started some related sites…

A. Yes: The Hedge Fund Implode-O-Meter (hf-implode.com), the Bank Implode-O-Meter (bankimplode.com), and the Home Builder Implode-O-Meter (builder-implode.com). The sites are really picking up in activity.

Q. Why do you have the Bank Implode-O-Meter when the original site is the Mortgage Lender Implode-O-Meter?

A. There are many banks out there going under and it has nothing to do with mortgages. Some are listed on both the bank and mortgage sites. It’s a different style of reporting. When Bear Stearns’ mortgage got cooked that was on the mortgage site. When JP Morgan offered to buy them for $2 per share, when it should have been zero, that’s a totally different story.

Q. Does the company have other businesses?

A. We put out an emailed Premium Newsletter as another form of communication. We also have Mr. Mortgage, which handles YouTube and other video feeds. We also work with other companies in a close relationship such as the Niche Report magazine. Niche Report is a mortgage industry magazine going to 18,000 lenders, brokers etc. each month. We are substantially involved with Green Credit Solutions in Lake Forest. They do loan modifications and debt consolidation.

Q. What is the fee for Green Credit to help a borrower get a deal from a lender, and does the company keep the fee even if the homeowner doesn’t get a loan modification?

A. For us to get behind (Green Credit), it has to be the real deal. Every single transaction is handled by an attorney. Hundreds of brokers across the nation are using it. The fee is $3,495. Green Credit does refund clients 100% on transactions they cannot help with. Debt consolidation is a separate business.

Q. Additional thoughts?

A. (Implode-O-Meter) is there to bring the truth out and help people in the industry survive. That’s the whole point.

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