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How to Survive Subprime Storm

How to Survive Subprime StormConsultants target mortgage lenders

April 10, 2007

By SAM GARCIA

Struggling subprime mortgage bankers are being courted by consultants about how to make the best out of today’s market.

The boards of directors of subprime lenders should consider 10 questions posed by Huron Consulting Group in an announcement today.

“The subprime mortgage world is under tremendous pressure,” Huron Managing Director Ken Evola said in the statement. “The recent news surrounding improperly managed subprime mortgages, which has in some cases forced bankruptcy, requires that companies carefully evaluate risk right now to determine an appropriate course of action.”

The Chicago-based company said more than 20 mortgage companies have failed or filed for bankruptcy protection since 2006.

“Subprime lenders in particular, and many lenders in general, need to modify their lending strategy in this fast changing market to appropriately consider the risks of a borrower’s ability to repay the loan,” Evola added.

Among the issues Huron, which operates online at www.HuronConsultingGroup.com, said board members and CEOs should analyze are appraisal reliability, anti-fraud controls and repurchase exposure.

Special focus should be given to the integrity of originators, processors and high-growth customers and service vendors, Huron said. In addition, financial statement reliability should be viewed in light of the other issues analyzed.

Vermillion Consulting and Mortgage Banking Services Direct have formed an alliance aimed at helping subprime lenders navigate the current storm, according to an announcement today. Illinois-based Vermillion claims to have worked with more than 250,000 mortgage professionals and more than 120 lenders.

The alliance was prompted by the current spate of rising defaults that have forced 24 lenders out of business, the pair said.

“Subprime lenders are unaware of the numerous ways they can maintain profitability, even as the market contracts,” Horseshoe President David Lykken said in the statement.

“We have been anticipating the current market conditions for two years,” the duo claim. “Instead of focusing on what may happen, we want to teach companies and their employees how to not just survive, but thrive, in the current market conditions.”

Mortgage Banking is on the Web at www.MbsDGroup.com, and Vermillion’s Web site address is www.DaleVermillion.com.

Meanwhile, Pinnacle Professional Consulting Services LLC has formed an alliance with REAL Alliances LLC, according to another announcement. The venture will focus on performance improvement at mortgage companies and other real estate related organizations.

New Jersey-based Pinnacle reportedly concentrates on maximizing performance at mortgage lending operations, while Pennsylvania-based REAL — which was launched this year, specializes in joint ventures between title insurance agencies and financial firms, the press release indicated.

REAL, which operates online at www.REALAlliances.com, and Pinnacle made their announcement at the 2007 annual RESPRO strategic alliance conference in Washington, D.C., this week. Issues covered at the conference reportedly include the latest marketplace trends, cross-marketing strategies, regulatory compliance tips, and looming regulatory challenges affecting affiliated business arrangements.


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