NJ subprime lenders not immune

From the Record:

Subprime lenders shrink in N.J.

Rose Mortgage Chief Executive Officer Ralph Vitiello and two colleagues were the only ones left last week at the 7-year-old subprime mortgage banking firm in Parsippany, which in January employed 60 people.”We’re taking care of loose ends,” Vitiello said in a telephone interview in which he described the credit crunch that caused the company to unravel.

Rose Mortgage is not the only New Jersey subprime lender to quietly shut down or downsize in recent months. First Financial Equities in Teaneck, a company that had been around for 16 years, stopped making loans and let about 100 people go at the end of last year. Like Rose Mortgage, First Financial specialized in making loans to borrowers who likely would have been rejected by a conventional lender because of low credit scores, high debt levels or unverified income. Larger lenders, including Marlton-based Popular Financial Holdings, Champion Mortgage in Parsippany and others, have announced firings this year that will eliminate at least 760 jobs in New Jersey.
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At least 30 home lenders nationwide have gone bankrupt, closed operations or sought buyers since the start of 2006, according to data compiled by Bloomberg News. Over that time, investors have fled lenders such as New Century Financial Corp., whose stock has lost 97 percent. New Century became the largest subprime mortgage lender ever to fail after it filed for bankruptcy early this month. Shares of other subprime institutions that lend in New Jersey also have taken a beating since the beginning of 2006, among them Fremont General Corp. (down 72 percent) and Accredited Home Lenders Inc. (a decline of 81 percent).

The boom in high-risk mortgage lending was bound to bust, said Joel Naroff, economist for Commerce Bank in Cherry Hill.

“The people working in an industry that was artificially pumping up the housing market were working in an industry that had very little job security,” he said. “It was like working in a dot-com in the 1990s.”

Many smaller mortgage companies which have been feeding loans to larger ones such as New Century and Countrywide Financial have been quietly closing shop all over the country, said Sam Garcia, publisher of National Mortgage Daily, an online trade publication. “Most of them are under the radar,” he said.