What a difference a year makes.
The subprime mortgage industry,heavily rooted in Orange County,saw loans fall by 40% in the first quarter from a year earlier, according to a survey by trade publication National Mortgage News.
The tally is the first look at the sector since subprime lenders started reeling late last year and Irvine’s New Century Financial Corp. began its spiral into bankruptcy in February.
The nation’s top 20 subprime lenders, including four based in OC and others with ties here, made $67 billion in loans in the first quarter, down from $110 billion in the first quarter of 2006, according to National Mortgage News.
Fifteen of the 20 lenders saw their business decline from a year earlier, according to the report.
New Century and Orange-based ACC Capital Holdings Corp., parent of Ameriquest Mortgage Co., took the biggest hits of any companies during the first quarter.
Ameriquest and sister company Argent Mortgage Corp. did an estimated $2 billion in loans in the quarter, down 76% from a year earlier, according to National Mortgage News.
New Century funded an estimated $1 billion in mortgages, down 91% from a year earlier.
Ranking Shift
A shift in the rankings of the largest subprime lenders is equally notable.
New Century fell from the No. 2 spot a year earlier to No. 19 in the first quarter. The combined entry of Ameriquest and Argent fell from No. 5 a year earlier to No. 12 this time around.
At their peak, Ameriquest and Argent, owned by Los Angeles billionaire Roland Arnall, were doing close to $12 billion in loans a quarter.
The first-quarter estimate reflects a well-documented retrenching by ACC during the past year and a half.
The move has been marked by local layoffs and consolidation of offices across the county.
New Century, which did $11.5 billion in loans in the first quarter of 2006, saw the wheels begin to fall off its business in earnest in early February, when it announced it had misstated prior earnings.
The company stopped making loans about a month later and filed for bankruptcy in early April.
New Century has sold most of its assets in bankruptcy court.
The steep drop in subprime loans, made to homebuyers with imperfect credit, had been expected.
The National Mortgage News numbers provide the first detailed look at how much the sector has contracted.
Wall Street investment banks that extended credit to lenders and bought mortgages packaged as bonds fueled the subprime boom. The banks started to re-evaluate their ties to lenders early in the year, cutting off credit and pulling back on bond purchases.
An even steeper drop is likely when National Mortgage News comes out with its second-quarter report. It stands to reflect the continued effects of corporate bankruptcies, sales of distressed operations and increased regulatory oversight.
Other Locals
Besides Ameriquest and New Century, other local lenders were hit hard in the first quarter.
Irvine’s Option One Mortgage Corp., a unit of Kansas City-based H & R; Block Inc., saw a 19% drop to $6.2 billion in loans.
But with the steeper declines at Ameriquest, New Century and others, Option One actually moved up to the No. 3 spot from No. 6 last year. That made Option One the top subprime lender based in OC in the first quarter.
Countrywide Financial Corp. of Calabasas came in at No. 1 with a 14% drop to $7.8 billion in first-quarter loans. Britain’s HSBC Finance PLC was No. 2 at $7.5 billion, down 48%.
Last month, H & R; Block said it’s moving ahead with plans to sell Option One to an arm of Cerberus Capital Management LP, a New York-based private equity firm.
The sale could close by October. A final sales price hasn’t been disclosed. Analysts expect Option One to sell for less than $800 million.
Another company in flux: Brea-based Fremont Investment & Loan, which did $3.8 billion in loans in the first quarter, down 56% from a year earlier. Fremont was down five spots to No. 9.
Santa Monica-based parent company Fremont General Corp. halted subprime lending in March. In May, the company sold off $2.9 billion in subprime loans to Ellington Capital Management, booking a $100 million pretax loss.
Seattle-based Washington Mutual Inc., which runs subprime arm Long Beach Mortgage Co. from Anaheim, saw an estimated 36% drop to $4.1 billion in first-quarter loans.
Bright Spot
Among the sector’s few bright spots: EMC Mortgage Corp., based in Lewisville, Texas. The company saw a 90% jump,yes, a jump,to $3.8 billion in first-quarter loans. That put EMC at No. 8, up from No. 16 a year earlier.
EMC, owned by Bear Stearns Cos., said in May it is opening an Irvine office where it plans to employ about 250 people in the next 12 to 18 months.
The office is next to that of Encore Credit Corp., an Irvine-based subprime mortgage company that was recently sold to Bear Stearns.
