Countrywide Financial Corp.
Calabasas
Subprime Units:
Full Spectrum Lending Division; Wholesale Lending Division, Specialty Lending Group
Entered Subprime Market:
1996, with launch of Full Spectrum
Subprime Loan Origination 2006:
$38.5 billion
Subprime as Share of Loan Volume:
7 percent, February
Subprime Market Share 2006:
8 percent, No. 1 nationwide
Alt-A Loans as Share of Volume:
Nearly 55 percent, 2006
Workforce:
55,000 companywide
Company Actions:
Reduced subprime lending in 2006. Cut 847 jobs in third quarter and another 2,500 in fourth quarter. On March 12, company announced it was cutting 108 jobs, all in subprime lending unit. Company also told brokers to stop offering borrowers the option of “no money down” on home loans and require at least 5 percent down.
Projections:
Chief Executive Angelo Mozilo said he was concerned about market and government overreaction that could cause a “liquidity crisis” and cut off all non-prime and even prime lending. But also told CNBC the “ugly shakeout” of pure subprime lenders should benefit his company.
Stock Price:
Closed at $35.22 on March 20, up from a 52-week low of $32.24 on Aug. 25 and down from a 52 week high of $45.26 on Feb. 2.
WMC Mortgage Co.
Burbank
Parent:
GE Money, the consumer and small business financial services unit of General Electric Corp.
Business Model:
Wholesale originator of non-prime loans. The company underwrites, processes and approves loans exclusively through the Web to reduce costs.
Entered Subprime Lending Market:
Late 1990s
Volume of Loans Originated in 2006:
$33 billion
Non-Prime Loan Origination:
100 percent; UBS estimates $21.6 billion in subprime loans made in 2006, or 57 percent of portfolio, with the remainder Alt A.
Subprime Market Share:
4.5 percent
Workforce:
About 2,400
Company Actions:
Raised FICO threshold to qualify for loans; made other unspecified adjustments throughout 2006. Announced 460 job cuts companywide, roughly 20 percent of workforce. Again raised FICO threshold. Reports surfaced of G.E. shopping company, which WMC has denied.
On Hold?:
GE bought company in midst of housing boom more than three years ago. As of last year, plans were to expand big into Canada, Mexico and Latin America.
Stock:
Shares of parent G.E. closed at $34.77 on March 20, up from 52-week low of $32.06 on July 14 and down from 52-week high of $38.49 on Dec. 20.
Fremont General Corp.
Santa Monica
Subprime Unit:
Fremont Investment & Loan, Anaheim
Entered Subprime Market:
2001
Non-Prime Loan Origination 2001:
$3.3 billion
Non-Prime Loan Origination 2006:
$25.8 billion (through September)
Subprime Market Share:
6.2 percent (fourth behind Countrywide, New Century, Option One)
Subprime Workforce:
2,400, plus network of brokers in 47 states (through end of 2006)
Company Actions:
Eliminated combined first and second mortgage loans to those with FICO scores under 640; stepped up calls to customers who had missed payments. Company announced March 5 it was exiting the subprime market, placing some of its 2,400 workers on paid leave. On March 16, company announced Credit Suisse had added $1 billion to its line of credit and the investment bank was shopping subprime division.
Regulatory Measures:
Federal Deposit Insurance Corp. issued a “cease and desist” order in February requiring that all adjustable rate loans be at fully indexed rates. FDIC regulators said Fremont was making loans “in a way that substantially increased the likelihood of borrower default or other loss to the bank,” and operating “without effective risk management policies and procedures.”
Update:
Disclosed last week it had sent termination notices to employees on paid leave and sold $4 billion in subprime loans to unnamed buyer, netting $950 million from first sale installement.
Stock:
Closed at $8.78 on March 21, up from a 52-week low of $5.55 on March 5 but down from a 52-week high of $22.95 on April 19.
Sources: Company filings, UBS, Business Journal research
