Significant operating losses have forced a New Jersey bank holding company to shut down its subprime mortgage subsidiary.
The operations of Columbia Home Loans LLC will be discontinued, according to an 8-K filing with the Securities and Exchange Commission today by parent OceanFirst Financial Corp. The winding down of the unit is expected to be completed within six months.
"The discontinuation was related to the significant operating losses incurred by Columbia in the past two quarters due to their origination of subprime mortgage loans," the filing said.
First quarter losses were reported at $5.4 million, and losses from Columbia are expected to continue for the foreseeable future, according to OceanFirst, the parent of OceanFirst Bank. Immediate costs resulting from the collapse are nearly $1 million. Early payment defaults and investor repurchase requests are the reasons for the losses.
Last month, OceanFirst said it was "negotiating a sale or rapid shutdown" of Valhalla, N.Y.-based Columbia -- which reported $1.5 billion in originations during the past five years, according to a conference call.
"We have, and will continue to react appropriately to the current situation," OceanFirst said in a separate SEC filing today. "The fact is that we will be moving past Columbia's mortgage banking business line."
The Toms River-based holding company announced yesterday that Columbia's president, Robert M. Pardes, resigned for personal reasons. Pardes was also chief lending officer at OceanFirst Bank.
"Quite simply, Columbia Home Loans LLC is the fastest growing mortgage banker in the Northeast and among the top 300 in the nation," the company's Web site still read today.