Florida Mortgage Company Shuts Down Jacksonville Office as Deliquencies Rise

The Florida Times-Union reports that WMC Mortgage Corp., a unit of GE, is shutting down its Jacksonville office and laying off 68 employees.

The announcement from the Florida mortgage company, which recently decided to discontinue some of its subprime lending operations, comes as subprime lenders across the country face increasing loan defaults and skittish investors and creditors.

Jacksonville, in addition to facing a high foreclosure rate on Florida home loans, maintains a wide base of mortgage processing centers for financial services companies.

The Jacksonville closure is part of a company-wide restructuring that will eliminate 463 employees, which represent 20 percent of its workforce.

WMC Mortgage will no longer give loans with no down payment.

WMC Mortgage originated about $9 billion in subprime (or bad credit Florida mortgage) volume in the fourth quarter of 2006, making it the fourth most prolific in the country, according to National Mortgage News.

In 2004, the Jacksonville Economic Development Commission approved $420,000 in city and state incentives to entice the company to open its mortgage loan servicing center in Jacksonville.

But the company never reached the thresholds required to receive the tax rebates, according to the JEDC, and no money was paid to it.

WMC Mortgage’s incentive under the “qualified target industry” tax credit program was the first package approved by the JEDC following a 60-day moratorium imposed by Mayor John Peyton.

The company’s struggles mirror those of other mortgage lenders nationwide and especially those heavily involved in subprime home loan products, which are high-interest mortgages intended for borrowers with less-than-ideal credit.

As adjustable-rate mortgages have begun to reset on those loans and the housing market has softened, the number of Florida mortgage defaults on subprime loans has risen sharply.

On Thursday, executives from subprime lender New Century Financial Corp. said that its creditors had forced it to stop making new loans.

Wachovia senior economist Mark Vitner said that Jacksonville’s exposure to the contraction being experienced by the mortgage market is greater than average but that he didn’t expect the difficulties experienced by subprime lenders to carry over into the rest of the home mortgage industry.

“It’s not driven by a deterioration in credit quality but by fraud,” said Vitner, adding that many subprime borrowers exaggerated incomes to receive Florida mortgages.

Although Jacksonville has many financial services, they are spread out over different sectors, reducing the city’s risk for large job losses, Jerry Mallot, executive director of Cornerstone, the economic development arm of the Chamber of Commerce, stated.

“There is weakness in the Florida mortgage sector of the marketplace, but there’s expansion in other areas of financial services,” he said.

Mallot said other companies, which are struggling with Jacksonville’s low unemployment rate, should absorb the skilled workers. What remains to be seen is whether the Florida mortgage lenders dealing in bad credit loans will tighten regualtions sooner rather than later.