Executive Defends Mortgage Lender, Downplays Recent Problems

The chief executive of Impac Mortgage Holdings in Irvine, Calif., doesn’t like what’s happening to his cross-town colleagues, New Century Financial.

According to the Orange County Register, Joe Tomkinson thinks New Century is being needlessly stampeded into bankruptcy by skittish investors, who cut off its funding because of rising defaults.

The home mortgage lender could actually handle its mounting level of delinquent borrowers if it were given the chance, Tomkinson says.

New Century, a mortgage lender specializing in home loan borrowers with flawed credit and in issuing no down payment mortgages, recently drew national attention and sparked a stock plunge after restating earnings to account for delinquency losses.

The firm also announced that it’s facing criminal and regulatory investigations, and stopped issuing new mortgage loans after investment banks it relies on for financing cut off its cash supply.

Tomkinson said he decided to speak out about New Century’s mortgage woes to put the story in perspective, saying that the sky is not falling.

He also wanted to distinguish his own mortgage company - which makes loans to borrowers with good credit scores but less documentation than required for prime loans - from the subprime lenders.

He conceded that Impac, the nation’s 10th largest lender of Alt-A mortgage loans - also is affected by bad publicity given to the subprime lending industry, even though an Alt-A loan is considered a step above subprime.

“Everything that goes on in the financial sector in general affects everyone in the financial sector,” he said.

Analysts expressed concern that the home mortgage loan lending crisis could be expanding after Impac reported that its percentage of late home loan payers doubled last year, from 3.1 percent to 6.2 percent.

But Tomkinson says his company has the funds to cover those loan losses.

While bad credit mortgage delinquencies rose to a four-year high of 13.3 percent in 2006, historically, subprime delinquency rates actually were higher, but fell to very low levels during the housing boom.

He agreed, though, that some subprime lenders have been accepting riskier and riskier home mortgage loans and that a frenzy of lending to risky borrowers making little or no down payments on their homes had to be curtailed.

Follow the link to continue reading in the Orange County Register …