California Home Loan Lender Forced to Close its Doors

A wave of defaults has claimed the first home loan casualty in the Sacramento mortgage lending community region with the demise of Central Pacific Mortgage, based in nearby Folsom, Calif.

The closure comes amid growing trouble nationally for lenders, as well as mortgage brokers. This case involves an influential local player who is actually an appointee of Gov. Arnold Schwarzenegger.

As bad credit mortgage loans issued to borrowers in pricey markets are now starting to backfire in the form of defaults, many providers are feeling the heat.

No exception is Central Pacific Mortgage, which closed last week and has formally dismissed all of its employees, the California Department of Corporations has confirmed.

“We know that it’s closed, and the next step in the process may be that they voluntarily surrender their license,” corporations spokesman Andrew Roth said.

Central Pacific’s 17-year president and CEO, John Courson, was the 2002 and 2003 chairman of the Mortgage Bankers Association, the national trade group for California mortgage providers.

Schwarzenegger appointed Courson chairman of the board of the California Housing Finance Agency, the state’s affordable housing bank. The post is unpaid and expires in 2009.