Log an entry in the consolidation of Orange County's subprime mortgage lending sector, a rather unceremonious one at that.

Bear Stearns Cos. said Monday it completed its buy of the main operation of Irvine's ECC Capital Corp., which makes loans to homebuyers with imperfect credit.

The investment bank was set to pay $26 million for ECC Capital's loan origination business.

But ECC actually ended up paying $7 million to Bear Stearns to close the deal. The company owed $33 million to Bear Stearns as part of money it was lent to make loans.
ECC wasn't able to sell the loans to investors for as much as it expected, resulting in the debt to Bear Stearns.

The sale is something of a going-out-of-business sale for ECC. The company recently counted a $100 million market value, and nominally sold for a quarter of that. It went public in 2005, raising $354 million.

ECC’s subprime business is set to become part of Bear Stearns Residential Mortgage Corp.

The buy is the first big close of a deal in an expected wave of consolidation among subprime mortgage lenders, which are struggling with shrinking business and profits and stepped up competition.

Orange-based ACC Capital Holdings Corp.’s Ameriquest Mortgage is rumored to be a takeover target for investment banks.

Fort Worth, Texas-based AmeriCredit Corp. recently wrapped up its buy of ACC’s Long Beach Acceptance Corp. for $282.5 million. Long Beach Acceptance makes auto loans that are in between prime and subprime.

In November, H&R Block Inc. said it is considering a sale of its Irvine-based Option One Mortgage Corp., which makes subprime home loans.