Florida Mortgage Company Forced to Close Office

WMC Mortgage Corp., a unit of GE, will be closing down its Jacksonville office and laying off 68 employees, the Florida Times-Union reports.

The announcement from the Florida mortgage company, which recently decided to discontinue some of its subprime lending operations, comes as subprime home loan operations across the country face increasing loan defaults and skittish investors and creditors.

Jacksonville, in addition to facing high Florida mortgage foreclosure rates, contains a wide base of home mortgage processing centers for financial services companies. The closure is part of a company-wide restructuring that will eliminate 463 employees, or 20 percent of its workforce.

In addition to the office closing its doors, WMC Mortgage as a whole will no longer give home loans with no down payments.

WMC Mortgage originated about $9 billion in subprime (or bad credit home loan mortgage) volume in the fourth quarter of 2006, making it the fourth most prolific in the country.

In 2004, the Jacksonville Economic Development Commission approved $420,000 in city and state incentives to entice the company to open a mortgage loan servicing center in Jacksonville. But the company never hit the thresholds required to receive the tax rebates, and no money was paid to it.

The company’s struggles mirror those of other bad credit mortgage loan originators nationwide, as higher-interest mortgages intended for the thousands of borrowers with less-than-ideal credit continue to cause problems.

As adjustable-rate mortgages have begun to reset on those loans and the housing market has softened, the number of bad credit mortgage defaults have soared.

On Thursday, executives from subprime lender New Century Financial Corp. said that its creditors had forced it to stop making new loans.

Wachovia senior economist Mark Vitner said that Jacksonville’s exposure to the contraction being experienced by the mortgage market is greater than average but that he didn’t expect the difficulties experienced by subprime lenders to carry over into the rest of the home mortgage industry.

“It’s not driven by a deterioration in credit quality but by fraud,” said Vitner, adding that many subprime borrowers exaggerated incomes to receive a home loan.

Although Jacksonville has many financial services, they are spread out over different sectors, reducing the city’s risk for large job losses, Jerry Mallot, executive director of the Chamber of Commerce, stated.

Mallot said other companies, which are struggling with Jacksonville’s low jobless rate, should absorb the workers. What remains to be seen is whether one mortgage company after another will continue along this destructive path, or if the industry will tighten regualtions.

SOURCE: Florida Times-Union