Wholesaler Holds Off on New Business

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8 · 24 · 07

An Ohio-based mortgage wholesale lender is reassuring customers that it has not closed down — even though it has suspended field operations.

Mercantile Mortgage Co. halted branch field operations for the time being, according to a message on it Web site dated Aug. 17. It is taking a breather while it considers how to deal with market turmoil.

“Mercantile Mortgage Co. has temporarily suspended branch field office operations to assess the dramatic market changes over the last few days,” the message read. “Significantly reducing expenses to allow the company to evaluate the market over the next 2 weeks and maintain its operations center for all functions, including lending, is a strategic financial move.”

The Columbus-based lender, which is reportedly licensed in 18 states, said its warehouse line is still open and available for “prudent” use.

Programs previously available included a 100% loan-to-value stated-income loan, 85% LTV non-owner occupied mortgages and debt ratios up to 55% on borrowers with credit scores of at least 600, according to an archived product matrix. Loan amounts went as high as $750,000, while credit scores down to 520 were allowed on loans up to 90% combined LTV.

Mercantile was the first wholesaler to be charged for the actions of a third-party mortgage broker.

The Federal Trade Commission, the Department of Housing and Urban Development and the State of Illinois agency sued Illinois mortgage broker Mark Diamond in 2002 for allegedly deceiving borrowers about their loan terms. Diamond, who regularly charged a 10% fee, was accused of targeting subprime borrowers and routinely soliciting low-income individuals, including elderly persons.

Mercantile, the wholesaler in many of the transactions, misled borrowers by misrepresenting or concealing the balloon payment, according to the government’s complaint.

A proposed settlement at the time required Mercantile to make a $250,000 payment for consumer redress and create a program to offer fully amortized, 30-year refinanced loans on favorable terms to certain borrowers with balloon loans. In addition, the company would pay the closing costs for the refinancings.

Mercantile, founded in 1988 by C. Daniel Silveous and Ron Noble, “has the capacity, at any time, to process and close loans at its operation center, which can be supported by a limited number of field reps,” the Web site stated today. “The field offices would not prohibit continuing operations and could be reopened at any time.”

The company’s said, “Market conditions will dictate the timing of full resumption of operations, should conditions begin improving.”

Mortgage Expert

Mortgage Daily Staff



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