The list of major subprime lenders for 2006 and 2007 resembles the casualty roster from the Battle of Verdun in World War I. Only difference: way fewer walking wounded this time.
Of the 30 biggest subprime home lenders in 2006, measured by dollar volume, 22 have gone bankrupt, shut down, been sold or been seized by Uncle Sam. Most of the survivors have scaled back.
Yesterday we began exploring The Fed’s Home Mortgage Disclosure Act database by describing how Washington Mutual quadrupled its bet on subprime lending in 2007, just in time for the housing downturn.
Today we’re going deeper, using HMDA data to show what happened to the top 30 subprime lenders nationwide in 2006; these 30 together accounted for 64 percent of the subprime home loans made that year.
The list makes for grim reading:
| Lender | Rank 2006 | Volume 2006 (billions) | Rank 2007 | Volume 2007 (billions) | Status |
|---|---|---|---|---|---|
| New Century Mortgage Corp. | 1 | $36.9 | NA | $- | Bankrupt |
| Countrywide Home Loans | 2 | $36.4 | 2 | $17.4 | Bought by BofA |
| Fremont Investment & Loan | 3 | $30.0 | 26 | $3.0 | Shut down |
| National City Bank | 4 | $30.0 | 17 | $4.3 | Struggling |
| WMC Mortgage Co. | 5 | $27.1 | 330 | $0.1 | Shut down |
| Option One Mortgage Corp | 6 | $23.9 | 7 | $9.4 | Shut down, servicing unit sold |
| Argent Mortgage Co. | 7 | $21.2 | 36 | $2.0 | Shut down |
| Long Beach Mortgage Co. | 8 | $18.2 | NA | $- | Shut down |
| Wells Fargo Bank | 9 | $16.4 | 9 | $7.1 | Wholesale unit closed |
| American Home Mortgage Corp. | 10 | $14.5 | 0 | $- | Shut down |
| Accredited Home Lenders Inc | 11 | $13.4 | 23 | $3.4 | Wholesale unit closed |
| Indymac Bank | 12 | $12.2 | 3 | $12.6 | Seized by FDIC |
| BNC Mortgage | 13 | $11.8 | 14 | $5.0 | Shut down |
| Decision One Mortgage | 14 | $11.2 | 30 | $2.5 | Shut down |
| Equifirst Corp. | 15 | $9.8 | 10 | $6.7 | Switched to FHA |
| Countrywide Bank | 16 | $9.3 | 5 | $11.1 | Bought by BofA |
| Chase Manhattan Bank USA | 17 | $8.0 | 8 | $9.2 | Wholesale unit closed |
| Greenpoint Mortgage Funding | 18 | $7.3 | 15 | $5.0 | Shut down |
| Wilmington Finance Inc. | 19 | $7.2 | 19 | $4.1 | Wholesale unit closed |
| Novastar Mortgage Inc. | 20 | $7.1 | 39 | $1.8 | Shut down |
| Resmae Mortgage Corp. | 21 | $6.8 | 48 | $1.2 | Shut down |
| Homecomings Financial Network | 22 | $6.8 | 18 | $4.2 | Shut down |
| Beneficial Co. | 23 | $6.0 | 11 | $6.7 | Operating |
| First Magnus Financial Corp. | 24 | $5.9 | NA | $- | Shut down |
| Washington Mutual Bank | 25 | $5.6 | 1 | $19.7 | Seized by FDIC, sold to JPMorgan Chase |
| Encore Credit Corp. | 26 | $5.0 | NA | $- | Shut down |
| Lehman Brothers Bank | 27 | $5.0 | 12 | $6.2 | Bankrupt |
| First NLC Financial Services | 28 | $4.5 | NA | $- | Shut down |
| People’s Choice Financial Corp. | 29 | $4.5 | NA | $- | Shut down |
| HFC Co. | 30 | $4.4 | 16 | $4.9 | Operating |
Countrywide shows up twice by the way because it operates under two federal regulators. The Fed oversees Countrywide Home Loans while the Office of Comptroller of the Currency supervises Countrywide Bank.
WaMu was not the only major lender that rolled the dice on subprime in 2007.
World Savings made WaMu look timid, expanding its subprime business by seven times, from $1.5 billion in 2006 to $10.65 billion in 2007. Banking operations of its parent, Wachovia, were just taken over by Citigroup in a shotgun marriage arranged by the Fed.
And then there’s Bear Stearns — remember them? — who doubled their subprime lending from $1.95 billion in 2006 to $3.9 billion in 2007.
World Savings and Bear Stearns were both too small in 2006 to make our list.
Thanks to Matt for digging up the status of all the lenders. In many cases that involved grave-digging.
We’ll continue our exploration of HMDA in future posts. If you have an idea, please tell us in the Comments section or send me an e-mail.
Here’s more mortgage meltdown coverage:
- JPMorgan buys seized WaMu, deposits are safe
- WaMu to slash money for loan losses
- Washington Mutual ousts CEO, reaches deal with regulator
- O.C. financial stocks hit after busted bailout
- Oil under $100, O.C. energy stocks hit
- O.C. mortgage rates dip amid turmoil
- Citigroup buying Wachovia banking operations
Secured Funding?
Flexpoint is gone but KNOTT forgotten.
Remember when Mozillo said Countrywide was positioned to snatch up market share once the other subprime lenders kicked the bucket? I think that was the same plan WaMu and Wachovia had in early 2007.
Glow22 asked about Secured Funding. It was a relatively small player in subprime, making $71.8 million in subprime loans in 2006. That put it in 442nd place out of 8,000 lenders. It disappeared from the list in 2007.
Does it concern anybody that Wells Fargo is No.9 on that list and the only one still in operation? Their subprime volume over the last 2 years was $23 Billion. That’s almost as much volume as WAMU and Indymac.
It concerns me - they’re hiding their losses somewhere, I just don’t know where.
OCtrojan, The losses from repossessed houses does not show up until they are liquidated, then the loss hits the books. Until then it is a non-performing loan, and the interest losses only show up. Paulson, Bernanke and company haven’t said this publicly, but these losses waiting in the wings will dwarf what we have seen so far. This, and the FACT that notices of default are rising faster than foreclosures is why the people that say a bottom is near have as much credibility as Bernanke when he said during his confirmation hearing that we were not in a housing bubble. If you doubt this, take a look at Redfin, especially higher end houses that are staying listed for longer now than a year ago.
great chart Matt, thank you
Is there a way for me to print this list/graph??
Regarding loan losses, here’s my understanding, which has improved after covering New Century and others, but is still lacking:
For loans sold by Wells or any other lender, the lender must maintain a repurchase reserve for the probability some loans may have to be repurchased. The increase in the reserve lowers earnings. If a loan is repurchased, the reserve may need to be increased, and earnings lowered by an equal amount. And after a foreclosure and sale of the foreclosure, the lender checks to see if it reserved enough, and if not, it takes a final hit to earnings. It may have reserved too much and could book a profit, though that is unlikely in this down market. So there are three chances to lower earnings, and two chances to raise them.
For loans held as investment against deposits, a lender sets aside an allowance for loan losses anticipating the probability and cost of some loans going delinquent. Increases to the allowance lower earnings by an equivalent amount. When a loan does go seriously delinquent it is my understanding a lender may decide to adjust the allowance, or not. However, after a lender foreclosures and then sells the foreclosure, as in the previous scenario, the lender must check if it reserved enough for the loss on the foreclosure. If it did not it will lower earnings, and if it did no change to earnings, and if it reserved too much, earnings could be raised a bit.
So the answer is holding onto REOs could delay a recognition of loss, if the lender didn’t set aside enough money on paper.
Quick Loan Funding, and I will be showing my age but, how about PINN FUND, and COREWEST (IMC), and do not forget FIRST PLUS, and Peoples choice went out after filing BK. Matt, do not even bother to look up Pinn Fund and Corewest as they were probably before you were born! I KNOW these were NOT recent but I thought it would be interesting to bring them up.
Lou Pacific
Real Estate and Mortgage Company Consultant
Serving OC for 30 Years.
Argent was bought out by Citigroup. I was employed by them when it happened. We made the transition into Citi Residential Lending at first, but now have merged to become Citimortgage. Alot of the Argent employees who stuck around or didn’t get laid off are still there.
Is ’sub-prime’ an officially loan category by the 4 main regulators?
Or is it defined by a range of lending terms regarding rate, collateral, points, and term?
Or…is it a term not defined and measured by the 4 regulators, but used by the media & industry?
CR blog said, if i recall correctly, that loan terms do not define a subprime loan; it’s defined by the creditworthiness of the borrower. If that’s true, then do the 4 regulators use a consistent definition of the borrower?
Any documentable clarification would help readers like me when looking at this list..
What about Ditech?
I am an executive search consultant that has seen almost all of his clients go down the drain. Lets not forget Ownit, First Franklin, Lime, Meritage, Novastar, Sebring and many others. For 15 years i placed a premium on building relationships. It still amazes me that we have seen a total extinction of the subprime business. The ironic thing is that this economy is creating even more derogatory credit and therefore nonprime will have to return in some fashion. There are too many people out there to ignore that can afford a home but cant get the credit. The list is growing with each day of this crisis. I hope our leaders can get it right and we can all go back to business. Not the old business but a fresh start with new boundaries.
Avl Dao-
There’s no universal definition of subprime, but FICO scores provide rough boundaries for the various credit categories. FICO’s between 540-620 are almost universally considered subprime. 620-680 could be considered subprime or Alt-A depending on who you ask, however Alt-A can also encompass 680-800 FICO scores with low/no income documentation. Prime is generally 680-800 with full documentation, but I expect this will get tighter over the coming years.
I understand your point but the new “NONPRIME” will be underwritten the way true nonprime should. It wont be dependent on credit score as much as credit story. The credit will be underwritten along with score and other benchmarks but the loan will primarily be made or not made based on common sense. The old days of making a loan based on score and score alone are over.
What is the status of Nationstar Mortgage formerly Centex Home Equity?
Why are they not being investigated?
Your list does not include Ameriquest Mortgage…although Argent is on the list. Ameriquest was sold to CitiGroup. They sold lots of sub-prime loans to wall street.