Lender Offers Options to ‘Subprime’ Borrowers

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Lender Offers Options to ‘Subprime’ Borrowers
Temme at his Woodland Hills office.

The housing bust wiped out many of the area’s largest mortgage lenders and put the once-bustling subprime industry on life support.

But it’s not dead.

From a small office in Woodland Hills, RC Temme Corp., a private-money lender founded more than three decades ago, continues to make loans to local borrowers who cannot qualify for standard mortgages.

Richard Temme, who has headed the shop since inception, said he has seen nearly every one of his competitors either go out of business or abandon the market as lawmakers have placed heavy restrictions on risky lending.

“We’re one of the only companies around doing these loans,” said Temme, 69. “It’s extremely difficult to get an institutional loan today. And for those people that don’t, we are one of their only options.”

Despite L.A.’s reputation as a center for exotic mortgage lending, nearly every private-money lender specializing in less-than-prime mortgages has stopped lending to consumers, industry insiders said. Big banks aren’t interested either.

In this new environment, the firm, which Temme said has a loan portfolio in “the many tens of millions” of dollars, is trying to establish itself as the go-to lender for borrowers struggling to get a mortgage. The company isn’t simply treading water; it’s pushing to originate more of the loans.

“We’re probably doing well over twice the number of loans we were doing a year ago,” said Temme, former president of the California Mortgage Association, a Sacramento non-profit advocate for the private-money lending industry. “We are processing loans at our maximum capacity. We are putting on staff and training them to allow us to process more loans.”

The lender’s persistence has turned a few heads in this now-small corner of the mortgage industry, where longtime lenders know their competitors well.

“His idea is he can work on a smaller profit, but make it up in volume because nobody else is going to be doing those type of loans,” said Stephen Leidner, founder of Lantern Financial Corp. in Sherman Oaks. “I think it’s the right business move for Rich.”

Leidner, whose company was “chased out of the residential mortgage market” by recent regulatory changes, said Temme has been aggressive in tackling the new rules. He noted that the company has in-house counsel, which is uncommon in such small outfits.

“(Temme) knows what he’s doing and he does it well,” said Leidner, also a past president of the California Mortgage Association.

Founded in 1976, RC Temme specializes in so-called high-cost mortgage loans.

“We don’t call them subprime,” Temme said. “They’re a substitute for subprime. The loan-to-value ratios are much lower.”

Indeed, the company tends to keep the loan-to-value ratio – a measure of the size of the loan relative to the purchase price – around 65 percent. By comparison, former subprime giant Countrywide Financial’s average ratio prior to the housing bust was a risky 84 percent.

RC Temme’s average residential mortgage loan also is small, staying below $250,000, with interest rates ranging from 7.95 percent to more than 11 percent.

It is the company’s conservative approach that Temme credits for its ability to weather a storm that claimed Countrywide – once the nation’s largest subprime lender – and scores of other longstanding institutions. The company’s 20 employees are required to verify as fully as possible a borrower’s ability to repay a loan, including checking tax returns, pay stubs, bank accounts and even stock portfolio holdings.

As Leidner put it, Temme is “a stickler for documentation.”

RC Temme has taken its lumps, though. As many as 5 percent of its loans have been in foreclosure at any one time, and the company has modified many other loans to avoid additional foreclosures. More recently, the percentage has fallen to less than 3.5 percent.

Temme, who’s conversant with even the most arcane congressional bills and regulations, said he and his in-house attorney are working overtime to make sure they comply with the heavy load of new regulations.

“We’re trying to sift through about 3,300 pages available to us so far to make sure we are in compliance,” he said.

ALTERNATIVE LENDER

RC Temme Corp.

Woodland Hillls

Top Local Executive: Richard Temme

Focus: Subprime loans

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