Daily News and Information for the Mortgage Loan Originator
22 of the Country’s Largest Mortgage Lenders Still at Risk
Monday, August 27, 2007
- By Staff Writer, Originator Times
HACKETTSTOWN, NJ - At least 22 of the country’s largest mortgage lenders that haven’t gone bankrupt are still engaged in risky underwriting practices, according to a new study.
“The Mortgage Credit Crisis,”a 250-page study released last week by SMR Research Corp., reviewed six measures of credit risk for each of 163 of the largest U.S. mortgage lenders. It scored each lender based on the results against a national average score of 1,000.
Nearly all lenders with risk scores above 1,750 are already bankrupt, closed, sold, or partially closed, the study found. Those scored 1,300 to 1,750 have had mixed results. Companies scored 1,000 to 1,300 may have trouble ahead, but due more to the financial panic than because of their own mistakes, SMR said.
“The companies whose underwriting errors caused their own demise are largely gone or are well-known to be among the ‘walking wounded,’” said SMR President Stuart A. Feldstein. “But the industry crisis won’t end until investors regain confidence and home prices stabilize.”
Eight of the nation’s 10 largest mortgage lenders earned low risk scores, suggesting they maintained fairly high credit standards from 2004 to 2006, when most of the underwriting excesses occurred, SMR said.
Bank of America had the lowest risk score (465) among the 10 biggest lenders. HSBC Bank had the highest score (1,444) among the top 10 lenders. Countrywide Financial had the second highest score among industry giants, at 1,016, indicating slightly above-average risk, SMR added.
The lender with the highest risk score was South Star Funding LLC of Atlanta, which scored 2,704. It is now closed.
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