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?
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.
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
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.
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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