A California-based wholesale lender is denying reports it has closed down -- though it has stopped taking applications for certain types of loans and reduced staff by 20 percent as a result of volume fallout.
Loan Center of California Inc. has ceased funding no ratio option ARMs and option ARMs with a combined loan-to-value greater than 90 percent, Brad Atterbury, the company's vice president, told MortgageDaily.com.
"We've responded to the market, which at this time is not receiving anything above 90% CLTV," he said. "We have a very wide investor base and that's the response we've been getting."
The company has seen volume drop about 60 to 70 percent from the end of last year to the present, which is "probably representative of the majority of our peer groups," Atterbury said. Loan Center funded $795 million in mortgages last year, up from $721 million in 2005, and has delivered about $3.1 billion to investors over the past six years, Atterbury and Loan Center Chief Executive Ed Blanch said in a phone interview.
After 23 employee layoffs on Tuesday and 20 at the end of March, 66 employees remain at Loan Center, which operates in Suisun City, Calif.. The cuts, across all departments, were part of measured steps to keep costs in line with volume, Atterbury said.
The lower volume is "due to a combination of factors, not just due to the doc type," he added. Tightening of overall credit standards and changes in the real estate market, including house price declines and appraisals coming in lower than borrowers' or brokers' expectations have all contributed. For example, Loan Center has turned away a lot of loans because it uses the same automated valuation models and other appraisal methods its investors use.
Loan Center is currently in a transition period and is adding new products to its loan menu, such as negative amortization loans with a second lien on a full-doc, stated verify transaction, according to the vice president.
"We're producing full-doc, stated verify option ARMs" Atterbury said. "We've always been strong in the Alt-A market, but we've moved more toward the option ARM market and that's where we're focusing our efforts."
Currently, about 95 percent of the wholesaler's production consists of option ARM loans, with nine out of 10 of these having FICO scores in excess of 700, one of the executives said in the call. About a year and a half ago, only 20 percent of its loans were option ARMs and about 80 percent were Alt-A. The company has never engaged in subprime lending.
Loan Center noted that recently-published, erroneous information about its business and practices had the ripple effect of at least one investor suspending purchase of its loans.
Loan Center remains in business and "we have not filed nor are we seeking bankruptcy protection," Blanch said. "Our company is solvent."
Additionally, "if we were secretly booking fraudulent loans we would have been shut down a long time ago," he added, noting that its warehouse lenders do audits on the company every year, while the California Department of Corporations performs audits every two years, and that it has been HUD-approved since 1995 even though it doesn't originate HUD loans.
Last year, the California wholesaler placed 19th on a list of the 100 best places to work for in the Bay Area and is set to make the ranking again this year, the executives said.