It’s not just a subprime crisis, as Housing Wire readers already know — but the lock-up in the secondary mortgage market is reaching into manufactured homes as well, according to a filing Monday with the Securities and Exchange Commission by Origen Financial, Inc. Origen originates and services manufactured housing loans, and said Monday that it has been hit hard by the securitization industry’s deep freeze: it wrote off all of its goodwill as the result of a stock price trading “well below” its tangible net book value, sold assets to meet margin calls by the company’s lenders, faces further whole loan sales to satisfy its lenders, suspended the bulk of all origination activity, and had to obtain a term extension from one lender. Whew. As if that weren’t enough, Origen also said its board of directors was also considering a possible sale of the entire company, as well. The company holds a sizable MH loan portfolio of $1 billion, likely the centerpiece of any negotiations over the company’s future. The disclosures came as Origen reported fourth quarter earning, notching a loss of $39.1 million, compared to $2.0 million in earnings during the year-ago period. Goodwill impairment totalled $32.3 million, while the company was forced to sell an asset-backed bond for $22.5 million in Febuary, generating a loss of $9.2 million for 2007 (when the loans were originated). The company suspended all originations tied to its warehouse lines, although it said it will continue so-called “third-party originations,” in which it is originating loans on a negotiated-sale basis. We’ve speculated here that warehouse lending — at least for now — is an endangered species. This would seem to be more proof of that sentiment. The SEC filling provided the most succinct summary of any mortgage participant yet regarding how the securitization model has collapsed for many market participants, worth reading:
Origen’s business model is dependent on the availability of credit, both for the funding of newly originated loans and for the periodic securitization of pools of loans that have been originated and funded by short-term borrowings from warehouse lenders. The securitization process permits Origen to sell bonds secured by the loans it has originated. The proceeds from the bond sales are used to pay off the warehouse lenders and recharge the availability of funding for newly originated loans. If warehouse funding is not available, or is available only on terms that do not permit Origen to profit from loan origination, Origen’s origination of loans only can be continued at a loss. If there is no market for securitization at rates of interest and leverage levels acceptable to Origen, Origen’s only alternative for satisfying its obligations under its warehouse line is to sell the manufactured housing loans to a purchaser. If purchasers are unwilling to pay at least the full amount advanced to borrowers plus all related fees and costs, sales of loans are not profitable for Origen.
Disclosure: The author owned no positions in any publicly-traded firms mentioned in this story when it was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
