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Breaking News: Lehman Brothers Closes BNC Mortgage

Lehman Brothers has just announced that they are closing their subprime mortgage unit, BNC Mortgage. The move will mean the loss of approximately 1200 jobs in 23 locations. They stated that current market conditions have forced them to reduce its resources and capacity in the subprime market.

The complete article is here.

Lehman Brothers also owns Aurora, a large Alt-A lender. Could they be next?

Posted by Gareth Bourriague - Benchmark Mortgage on 08/22/2007 02:13 PM

Comments (11)

bnc mortgage, mortgage crisis, lehman brothers, subprime

11 Comments on Breaking News: Lehman Brothers Closes BNC Mortgage

AUG

2007

I think the trickle down effect of job loss may turn out to be another story. I read Capital One closed its subprime mortgage company as well.

WOW...They arer dropping like flys--mike

This just breaks my heart. These are good folks who did nothing wrong, and they and their families are paying the price for this debacle. Aloha

lehman brothers closed that entity because the product is no longer viable. it was a business decision done by choice.

that is no reflection on aurora who's products are marketable.

Thanks for all the comments.

Jay - Aurora's products are quickly becoming non-marketable. I priced this scenario today through Aurora:

48% loan to value; stated income/stated asset (self-employed 13 years); 662 middle score; owner-occupied single family residence. The rate for a 30 year fixed, COSTING .50%, was 13% with a 3 year hard pre-payment penalty. That's not a marketable product. Aurora's bread and butter has been reduced documentation/stated income loans, and now they're pricing them so that no one will take them. What does that say to you?

Gareth,

stated income/stated assets in general no one in the market likes that loan.

throw in a 662 score and they like it even less.

it's not just aurora that doesn't like that loan.

whose option #2? and at what price?

jay

AUG

2007

I can do the loan in-house for 9.875% on a 30 year fixed; I also received a quote from Encore that was 9.35 on a 30 year fixed.

When a lender prices themselves out of the market like Aurora has done on these types of loans, it raises questions. My local AE has been pricing first mortgages upwards of 13% and seconds upwards of 20%. He is telling me that he's hearing the internal rumours that they may not stay in business, which brings me back to my original question - Is Aurora next? He thinks they could be.

Their creditors dictated this one...The turned off most of their products over a month ago and have just been closing up their pipeline since then...Now they are saying 40,000 mortgage professionals have lost their jobs this year...

The market may be crazy, but I still love it.

Aurora is still around but the RATES OMG - better choices out there

They may hiked rates to absorb the costs of closing BNC. Aurora can't be closing that much business at those rates can they? I haven't used them in the past 30 days AT ALL. They are not competitive on rate any more. Alt A has squeezed product offerings. Not sure if Lehman will just cut the losses now hmmmmm

Jim - that number will increase, I'm sure.

David - I'm in more of a love/hate relationship that is turning into like/hate. =)

Shannon - you could be right about absorbing the costs of the BNC shutdown. I just don't see them doing much business that way. Who are you using for Alt-A?

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