House Mortgage Mortgage Corp

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almost 2,000 in January alone. At least two dozen of the more than
8,000 mortgage lenders have been forced to close or sell operations
since the start of 2006.
     Subprime lenders Ameriquest Mortgage Co. in Irvine,
California; Ownit Mortgage Solutions LLC and WMC Mortgage Corp., a
subsidiary of General Electric Co., in Woodland Hills, California;
Mortgage Lenders Network USA Inc. in Middletown, Connecticut and
Fremont General Corp. together have fired more than 5,600 workers
in the past year.

                            New Century

     New Century Financial Corp., the second-largest subprime
lender, said today it ran out of cash to pay back creditors who are
demanding their money now. The Irvine, California-based company has
lost 90 percent of its market value this year and stopped making
new subprime loans, prompting speculation it will seek bankruptcy
protection. New Century already has cut 300 jobs and its 7,000
remaining employees are waiting to see if the company will survive.
     Fremont General, the Brea, California-based lender that is
trying to sell its residential-mortgage unit, was ordered to stop
making subprime loans by the U.S. Federal Deposit Insurance Corp.
last week. Fremont was marketing and extending loans ``in a way
that substantially increased the likelihood of borrower default or
other loss to the bank,'' the FDIC said last week.
     Doug Duncan, chief economist of the Washington-based Mortgage
Bankers Association, predicted in January that more than 100 home
lenders may fail this year.
     The subprime crisis ``has taken the fuel out of the real
estate market,'' said Edward Leamer, director of the UCLA Anderson
Forecast in Los Angeles. ``The market needs new money in order to
appreciate, and all of that money is gone for a very long time. The
regulators are not going to allow it to happen again.''

                           Higher Rates

     Subprime mortgages are given to people who wouldn't qualify
for standard home loans and typically have rates at least 2 or 3
percentage points above safer prime loans. The portion of subprime
loans that financed new mortgages rose to 20 percent last year from
5 percent in 2001, according to the Mortgage Bankers Association.
     Subprime loans contributed to a home-ownership rate that
reached a record 69.3 percent of U.S. households in the second
quarter of 2004, up 5.4 percentage points from the same period in
1991, according to the U.S. Census Bureau.
     ``Probably the gain in home ownership over the last four, five
years, is almost entirely due to looser lending standards,'' said
James Fielding, a homebuilding credit analyst at Standard & Poor's
in New York.

                        Refinancing Option

     As home prices steadily gained from 2001 to 2006, homeowners
who fell behind on mortgage payments could sell their homes and pay
off their loans or get better refinancing terms based on the higher
value of their property. Now that home values are declining, many
borrowers won't be able to refinance because they would have to
come up with the difference between their new mortgage and what
their home is now worth.
     Defaults may dump more than 500,000 homes on a housing market
already saturated with leftover inventory built during boom times,
New York-based bond research firm CreditSights Inc. said in a March
1 report.
     The portion of subprime loans more than 60 days delinquent or
in foreclosure rose to 10 percent as of Dec. 31, from 5.4 percent
in May 2005, the highest in seven years, according data compiled by
Friedman Billings Ramsey Group Inc. of Arlington, Virginia.
     Many of the delinquencies came from loans where borrowers
didn't have to provide tax returns or other evidence of income, or
where they financed 100 percent or more of the home's value,
CreditSights analyst David Hendler wrote in a March 5 report. Other
defaults came on adjustable-rate mortgages with artificially low
introductory ``teaser'' rates, sometimes with ``option'' payment
plans that allowed borrowers to defer interest.

                      `Beginning of the Wave'

     Banks ought to be concerned about such loans and are likely to
see more missed payments and foreclosures as consumers with weak
credit histories begin to face higher monthly mortgage payments,
Federal Reserve Governor Susan Bies said last week.
     ``What we're seeing in this narrow segment is the beginning of
the wave,'' Bies said. ``This is not the end, this is the
beginning.''
     About 1.5 million U.S. homeowners out of a total of 80 million
will lose their homes through foreclosure, University of
California-Berkeley economist Ken Rosen said last week.
     ``The subprime borrowers paid too much for their homes, and
all of a sudden, they'll see their house value drop by 10 to 15
percent,'' Rosen said.

                        Borrowers at Risk

     The Center for Responsible Lending in Durham, North Carolina,
said in a December study that as many as 2.2 million borrowers are
at risk of losing their homes, at a potential cost of $164 billion,
from subprime mortgages originated from 1998 through 2006.
     The number of U.S. foreclosures rose 42 percent to 1.2 million
last year from 2005, according to Irvine, California-based
RealtyTrac, while delinquencies in the last three months of 2006
rose to the highest level in four years, the Federal Reserve said.
     Housing and related industries, which account for about 23
percent of the U.S. economy -- including makers of everything from
copper pipes to kitchen cabinets -- fired about 100,000 workers
last year. The total will be higher this year, according to Amal
Bendimerad of the Joint Center for Housing Studies at Harvard
University in Cambridge, Massachusetts.
     By the end of this year, job cuts at companies including
Benton Harbor, Michigan-based Whirlpool Corp., Masco Corp. of
Taylor, Michigan, and St. Louis-based Emerson Electric Co. may
exceed the fallout from the 1991 housing slump, said Paul Puryear,
managing director at St. Petersburg, Florida-based Raymond James &
Associates. The Bureau of Labor Statistics doesn't give data for
housing-related job losses.

                             `Fallout'

     ``The fallout in the early 1990s was much worse than what
we've seen so far, but this downturn is not over,'' Puryear said.
``The full impact hasn't hit yet.''
     U.S. House Financial Services Committee Chairman Barney Frank,
a Massachusetts Democrat, said he may propose legislation to reign
in ``inappropriate'' lending, and a House subcommittee is scheduled
to consider subprime lending and foreclosures March 27.
     ``The standards got loosened so much, and there's always the
pressure to make money that there was pressure to maybe make the
questionable loans that shouldn't have been made,'' said Ohio
Representative Paul Gillmor, the subcommittee's top Republican, in
a March 9 interview. ``The major problem has been the overall
deterioration in credit standards by lenders that's exacerbated by
those who are unscrupulous.''
     The Federal Bureau of Investigation says mortgage fraud is
``pervasive and growing'' and the incidence of such fraud has
almost doubled in the past three years.

                    `Unscrupulous Individuals'

     ``There has been an increase in unscrupulous individuals in
the market,'' said Arthur Prieston, chairman of the Prieston Group,
a San Francisco-based company that investigates mortgage fraud.
``There's an unfair assumption of a connection between subprime
failure and fraud. But there is a connection between early default
and fraud.''
      Mortgage fraud is committed when a borrower misrepresents
himself or his finances to a lender. Some of that fraud involved
speculators. They drove up prices during the boom by ordering new
homes with the intent of selling them immediately after taking
possession.
     That ``flipping'' inflated demand and put the speculators in
competition with the homebuilders, propelling the median U.S. home
price to $276,000 last June from $177,000 in February 2001.
     ``A lot of the housing bubble was speculation,'' said Mike
Inselmann of the Houston-based research firm Metrostudy.

                           Cancellations

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