Warehouse Margin Calls

Merrill Lynch, driven by the “financial situation” some of its clients are in, is performing margin calls on these subprime originators that it has been funding through its warehouse lending group.

“When the situation warrants it, we will make a call as a normal course of our business,” explained a spokesman to MortgageDaily.com. “But that is a normal part of our business that happens when the financial factors require it. It’s not driven by us so much as by the financial situation clients find themselves in.”

The margin calls, he said, require these lenders to post additional capital.

He declined to reveal specifics of the calls or the number or identity of the clients being called, except to state that the lenders receiving margin calls did not include the essentially defunct wholesale lenders Ownit Mortgage Solutions Inc., of Agoura Hills, Cal., and Mortgage Lenders Network, of Middletown, Conn., both of whom had received some funding from Merrill.

MLN recently sought bankruptcy protection.

A number of subprime wholesalers have been stung by a rash of repurchases because of early payment defaults. Repurchases can quickly deplete working capital and have put several companies out of business recently.

Last year, Merrill acquired subprime lender, First Franklin Financial Corp., of San Jose, Calif., for $1.3 billion from National City Corp. Also included in that deal were National City Home Loan Services and NationPoint.

Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at demuth933@earthlink.net