Fannie Mae Nixes Loans From Troubled Mortgage Lender
Fannie Mae no longer will allow New Century Financial to sell home mortgage loans to the U.S. government-sponsored company, alleging the troubled lender has breached the terms of its contracts.
Fannie Mae, formally known as the Federal National Mortgage Association, notified the mortgage company last week that it had violated the contract, according to documents filed with the SEC.
As a result, New Century and its subsidiaries no longer may sell mortgage loans directly to Fannie Mae or act as the primary loan servicing operation for home loans for the company, according to the filing.
Fannie Mae finances one of every five home loans in the United States.
In other bad credit mortgage news, Wells Fargo Home Mortgage is axing more than 500 jobs in a division that makes home loans to high-risk borrowers.
Most of the layoffs, focused on Arizona, California and South Carolina, stem from Wells Fargo’s recent decision to make it more difficult for borrowers with blemished credit records to qualify for mortgages.
The tougher lending standards means Wells Fargo will be handling fewer bad credit mortgages, reducing the need for as much staffing, the company said in a statement late Monday. The company said many of the workers affected received layoff notices last month.
Several other subprime mortgage providers, including the corporate parent of Ameriquest Mortgage Co., also have been trimming staff as a response to the recent market turmoil.
Wells Fargo ranks among the nation’s largest bad credit mortgage lenders, but so far has been able to avoid major losses.
The problems in the industry sent another mortgage lender into bankruptcy yesterday. People’s Choice Financial, which operates a subprime mortgage division, filed for Chapter 11 bankruptcy protection yesterday.
Other subprime lenders, including Ownit Mortgage Solutions and Mortgage Lenders Network Inc., have also sought bankruptcy protection.
The move against New Century by Fannie Mae is the latest blow to the company, which rode the housing market boom to become the second-largest U.S. subprime mortgage lender by volume but now teeters on the brink of implosion.
The company has stopped making new home loans because of a lack of funds and is the subject of Justice Department and SEC investigations into its questionable accounting practices and trading of its stock.
New Century also disclosed yesterday that it had received a cease-and-desist order from the nation’s most populous state. The gist: no more California mortgage loan transactions can be processed by the lender.
SOURCE: Columbus Dispatch