Make sure the evil JP Morgan gets their share of the blame.
Mish’s Global Economic Trend Analysis
In its statement, Ownit blamed Merrill Lynch & Co. for the closure, saying the company was one of its primary lenders and had cut off its funding Tuesday. Merrill Lynch holds about 20% of Ownit. Merrill Lynch spokesman Bill Halldin said Ownit’s statement was misleading, but he declined to comment further.
Two people with knowledge of the funding arrangement said JPMorgan Chase & Co. cut off Ownit’s funding Monday, leaving the lender unable to issue loans. JPMorgan couldn’t be reached for comment.
According to trade publication Origination News, Ownit ranked 11th among sub-prime wholesale lenders in the first half of 2006 with $5.5 billion in loans.
One Response
Who’s the bad guy here? It’s the sub-prime lenders who have been persuading people who can’t afford homes to take out ridiculous interest-only, negatively amortizing option ARMs with no documentation of income, in the knowledge that they can sell off these sure-to-default loans to the GSEs and won’t be left holding the bag.
If Ownit is a purveyor of these kind of sleazy loans, they should never have been allowed to issue them in the first place.
They aren’t the first sub-prime lender to go under, and they won’t be the last. The whole real-estate industry has been filled with sleazy and corrupt activity during this housing bubble, from the mortgage brokers to the lenders to the developers to the real estate agents to the appraisers to the speculators and flippers. I place most of the blame on the lenders and the GSEs–the lenders for not exercising due care to verify that the loan will be repaid, and the GSEs for buying unverified/crappy loans, which gave the lenders implicit approval to originate crappy loans.