“We are no longer originating loans”

From the Record:

Is your lender a risk taker?

Which New Jersey-based mortgage lender makes the riskiest loans? According to SMR Research Corp., it’s CIT Group Inc., which is in the process of exiting its Livingston-based home-loan business.

The second- and third-riskiest underwriters among the largest lenders in New Jersey were Fortress Investment Group, which owns Champion Mortgage in Parsippany; and Opteum Financial Services, which in June sold its Paramus-based loan-origination business on Century Road.

The findings were part of SMR’s 250-page study, “The Mortgage Credit Crisis,” released last month. The study, the first of its kind by SMR, showed which of the 163 largest lenders nationwide have been the most lax in their underwriting, and which have been most prudent.

SMR looked at loan documents filed with county courthouses around the country and at loan data filed with the federal government to meet Home Loan and Mortgage Disclosure Act requirements. Credit-risk scores assigned by Hackettstown-based SMR were based on estimates of how much equity a lender’s customers had in their homes, said Stuart Feldstein, president of SMR.
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Feldstein said that the recent spate of mortgage-lender insolvencies due to poor underwriting is probably near an end, but uncertainty about the quality of mortgage-backed securities continues to cause mortgage-market turmoil. “The industry crisis won’t end until investors regain confidence and home prices stabilize,” he said in a statement. “The companies whose underwriting errors caused their own demise are largely gone or are well-known to be among the ‘walking wounded.’ ”

A score of 1,000 was the average for the 163-member group of lenders.

Most of the lenders with SMR credit-risk scores of more than 1,750 are now “bankrupt, closed, sold or partially closed,” Feldstein said in a phone interview last week.

The riskiest lenders in the country were Atlanta-based Southstar Funding; Domestic Bank of Cranston, R.I.; and Lenders Direct Capital Corp. of California. They were given scores of 2,704, 2,644 and 2,610, respectively. Southstar has closed and Lenders Direct exited its wholesale-lending business. Domestic Bank, a federally insured depository which says on its Web site that many of its mortgage loans are backed by the Federal Housing Administration, is still in business.

SMR gave CIT a score of 2,008.

CIT, which is primarily a commercial lender, blamed a $134.5 million second-quarter loss on hefty losses in its home-loan unit.

“We are no longer originating loans,” spokeswoman Mary Flynn said last week.
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Two very conservative New Jersey mortgage lenders, Hudson City Savings Bank in Paramus and Trident Mortgage LP in Cherry Hill, were among the five lenders nationwide with the lowest or least risky scores, Feldstein said.

Trident Mortgage was given a score of 270, which means “it basically is not participating in risky underwriting,” Feldstein said.

Hudson City, which was given a score of 302, is “an extremely conservative lender, scoring way, way below the national average on risky lending,” Feldstein said.