|A number of nonprime mortgage lenders have recently decided to trim their operations, and profit margin pressures have led yet another mortgage player to do so. This time around, a California-based wholesaler will shed about 10 percent of its workforce with its exit from the subprime business.
American Mortgage Network no longer takes subprime loan applications. Market conditions prompted the decision, which will result in 94 layoffs, according to Elise Wilkinson, spokeswoman for Wachovia Corp., which recently acquired the wholesaler’s parent AmNet Mortgage Inc.
“After careful consideration, AmNet decided to discontinue originating subprime loans,” Wilkinson said. “The subprime mortgage business, in particular, is being met with a challenge in pricing and profits. The market conditions make it difficult to compete with larger, more established” competitors.
AmNet, which has about 1,000 employees, entered the subprime sector about a year ago. Subprime loans represented less than 5 percent of total originations, the spokeswoman said. The San Diego-based lender funded a total $9 billion in residential mortgages in 2004 and projects fundings of $14 billion to $15 billion for 2005, according to an announcement.
The subprime employees have received layoff notices and will remain in place until mid-March. AmNet is “doing everything possible to find them other positions within the company,” Wilkinson said.
But “AmNet is certainly not a first” in narrowing operations due to market conditions, the spokeswoman noted.
Indeed, a challenging interest rate environment reportedly prompted Ameriquest Mortgage Co. to cut about 1,500 employees in November 2005.
Last week MortgageIT Holdings Inc., a New York-based real estate investment trust, said it reduced subprime branches and cut related jobs as a result of “significant pressure” on gain on sale margins that persisted in the subprime business. The REIT expects preliminary subprime fundings of $972 million in the fourth quarter — off $328 million from the prior quarter — to plunge to between $200 and $400 million this quarter.
Another REIT that has cited net interest margin compression and competitive pricing pressures is Impac Mortgage Holdings Inc. The nonprime lender, which reported a second quarter net loss of $55 million, compared to earnings of $173.6 million in the prior quarter, is being sued by shareholders for allegedly lying about its financial condition.
ECC Capital Corp., a California-based subprime lender, recently announced it will eliminate 440 positions — about 27% of its workforce — this quarter as it consolidates wholesale loans processing centers to reduce costs and improve efficiency.
Unable to meet terms of its warehouse credit line, Washtenaw Mortgage recently stopped originating loans and said it would sell its portfolio, as well as layoff all employees. The Michigan-based originator of conforming, FHA and Alt-A loans since 1981, was “impacted by rising interest rates, the subsequent declining demand for new loans, further downward pricing pressure on net sales revenue and continuing mortgage loan repurchases.”
AmNet, however, anticipates growth. The company, which has about 1,000 employees, recently stated the merger with Wachovia has initiated its “journey to be among the top wholesale bankers in the nation.”