A Michigan-based subprime wholesaler has exited the market. But the company's president says they'll be back.
Investaid Corp. ceased taking applications yesterday due to the current instability in the subprime mortgage market, President Bob Rubin told MortgageDaily.com in a phone interview today.
"The conditions in the market continue to collapse and the pressure placed upon our affiliated bank from the regulatory agencies with regards to subprime is impossible to bear," Investaid said in an e-mail statement to workers yesterday.
The company's "temporary suspension of business" is "due to massive meltdown and perception of loans that have been written in the subprime sector," Rubin said in the interview. "We're a victim, but we're not going to be a permanent victim."
"I have been in business since 1964 and have seen worse debacles than this," he added. "So, I'll try to turn this into an opportunity to grab market share."
The temporary closure of the origination arm, which funded about $37 million per month and offered 100 percent financing for subprime borrowers, has resulted in approximately 40 layoffs, of which half were originators and the other half support staff, Rubin said. Twelve employees have been retained to service and sell loans.
Investaid is licensed to do business in Indiana, Florida, Kentucky, Wisconsin, Missouri, Arizona, Colorado, Nevada and Utah, states where there is "more economic stability and we can impose a higher prepay penalty," according to the executive. The subprime wholesaler had plans to enter Kansas, and it previously exited Michigan and Ohio because of falling real estate values.
Investaid reportedly had a broker base of about 2,500, though the number it did business with was smaller.
While on the sidelines, the Southfield-based lender is analyzing where it can make a clear profit.
Investaid's methodology has been combined loan-to-value loans. Among its plans are to continue looking for opportunities in the CLTV arena and in foreclosure bailout loans, which it offered at 65 percent LTV, the executive said.
"With this subprime market moving, we don't want to originate anything that we can't sell," Rubin explained. "We're reformulating ideas of our products ... and we intend to reemerge when we get clear indications that we can operate profitably."