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2nd Lien Programs Halted

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2nd Lien Programs HaltedCitiMortgage, Franklin American issue notices to correspondent customers

November 2, 2007

By SAM GARCIA

Two correspondent lenders have stopped buying second lien loans.

In a bulletin issued earlier this week, CitiMortgage’s correspondent lending division said it would discontinue buying second liens and home equity loans effective today. Any loans not locked by yesterday and closed by Dec. 31 will not be purchased.

“We want to reiterate that we are not moving away from the overall mortgage market,” Citi said. “Rather, we are making fluid decisions in the current environment to leverage the products that will allow us to continue to grow our business.”

As an alternative, the O’Fallon, Mo.-based company suggested using mortgage insurance, including monthly, split premium and lender paid options.

“Equity volumes have dropped substantially and many lenders have taken advantage of the LPMI and Split Premium MI for their borrowers,” an accompanying e-mail from a Citi executive stated. “We are one of very few that offer lender paid and split premium M.I. on non agency as well as agency loans.”

Today, Franklin American Mortgage Co.’s correspondent lending division also issued a notice indicating it is suspending its closed end second lien program at 5 p.m. today.

The lender said it will honor all locked loans.

The Franklin, Tenn.-based company attributed its decision to “continuing instability and liquidity issues in the secondary market.”

“We hope that we can resume our business in these products as soon as the market returns to some level of stability.,” Franklin said.

 

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: mtgsam@aol.com

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