Mortgage News Daily received a tip from a reader over the weekend that yet another
mortgage lender has expired.
United Pacific Mortgage (UPM), headquartered in Woodland Hills,
California, is rumored to have shut its doors, laying off its 95 employees on
Friday. According to Hoovers, a Dow Jones Company, UPM is privately held and
participated with 100 lenders. Its sister firm, Mandalay Mortgage, announced
in January that, due to heavy losses in the subprime mortgage market, it would
no longer be accepting loan applications. It is apparently losses from Mandalay's
loans that are forcing UPM to close.
We attempted to verify the situation at UPM on Monday but calls to both its
corporate and consumer telephone numbers were not answered and direct phone
numbers to employees all defaulted to voice mail.
The information we received said that Countrywide Mortgage
will be "absorbing" the production team. Again we attempted to verify
this with Countrywide but their media office appeared to know nothing about
it and at this hour we are still awaiting information from higher rungs on the
But it is possible that Countrywide has been just a little busy. According
to Greg Morcroft, writing for MarketWatch the company on Tuesday reported a
33 percent drop in net income for the second quarter and announced that payments
were delinquent on nearly 24 percent of its subprime mortgage loans compared
to 15.33 percent at the same time in 2006. More disquieting, there is evidence
that problems in the company's subprime sector appear to have spread to
their higher rated prime loans, specifically home equity products
on which 4.56 percent of customers were behind in payments compared to 1.77
percent during the same period last year.
Countrywide's net income for the quarter fell to $485 million or 0.81
per share from $722 million or $1.15 a share one year ago. Furthermore the company's
subprime loan production was off by 50 percent and it cut earnings estimate
to $2.70 to $3.30 per share from an earlier estimate of $3.50 to $4.30.
Another lender is still alive but retrenching. Indymac Bank announced
late last week that they were laying off 400 employees, approximately 4 percent
of its 9,600 person workforce. The layoffs are primarily in the operations and
process and technology groups and are spread across various offices around the
Indymac's CEO, Mike Perry in an email sent to all employees said that
the mortgage market continues to be very tough. Indymac's dollar loan
volume was down 12% in the second quarter compared to the first quarter and
loan units were down by 17% because the company has eliminated the 80/20 piggyback
product in favor of higher-LTV programs with mortgage insurance. "While
recently our pipeline has been recovering, we concluded that we needed to both
"right-size" our workforce to our current volumes and also be very
"hardnosed" in redesigning our processes in our drive to become
"the" low cost provider in the mortgage industry, while at the same
time ensuring that we maintain our high standards for customer service and credit
quality. Recent advances in our technology are enabling us to be more productive
and efficient, and we simply must reap the cost savings associated with these
advances and pass them on to our customers in order to be competitive in the
In an email a few days before the layoff notification, Perry said: "...
delinquencies in our $184 billion servicing portfolio increased in the second
quarter of 2007... 30+ day delinquencies were 5.35 percent, up from 4.10
percent a year ago and 4.37 percent last quarter. Foreclosures also increased
to 1.15 percent in the second quarter, up from 0.89 percent in the prior quarter.
"While our delinquency rates have increased, they are comparable to Countrywide
Financial Corp., which was ranked by the National Mortgage News as the No. 1
residential mortgage originator and the No. 2 residential servicer in the U.S.
for the first quarter of 2007. On July 16, 2007, Countrywide reported a 30+
day delinquency rate in their servicing portfolio of 4.77 percent for the period
ending June 30, 2007. Indymac's modestly higher delinquency rate can be
attributed to the fact that Countrywide carries a much higher mix of agency/conforming
loans in their servicing portfolio relative to Indymac."
Perry refuted claims that the quality of Indymac's loans is just a notch
above subprime saying that prime first lien loans, including those sold in Alt-A
securitizations, account for 93 percent of Indymac's servicing portfolio
and the delinquency rate on these loans was 4.69 percent for the second quarter
of 2007. The delinquency rate on our subprime loans, which account for three
percent of our servicing portfolio, was 22.5 percent, a rate consistent with
industry subprime trends and not materially above where it was a year ago. This
clearly demonstrates that the vast majority of our loans are of significantly
higher credit quality than subprime loans-by a very wide margin.
Indymac will be taking a pre-tax charge to earnings of approximately $6.5 million
in the third quarter, most of which is severance for laid-off employees. Perry
said the cost savings will more than offset this charge during the second half
of this year, and on an ongoing basis the company projects $30 million in annual
The company was founded in the late 1980s as a semi-spin-off of Countrywide
Mortgage. In 2000 the now independent company acquired a depository institution
and from there became the largest savings and loan in Los Angeles. It is currently
the 7th largest savings and loan and the 2nd largest independent mortgage lender
in the country.