South Florida Mortgage Lenders Sent Scrambling By Subprime Turmoil

The South Florida housing market has a great deal at stake in the recent furor over the quality of the so-called subprime mortgage market that has sent Wall Street into a tizzy in the past week and has lenders across the nation re-examining loan portfolios.

The rate of Florida home loans made in this region to borrowers with shaky credit is more than double the national average.

Meanwhile, the troubles of New Century Financial Corp., the nation’s second-largest subprime lender, have affected local offices of one of its subsidiaries.

Home 123 Mortgage, with offices in Boca Raton, Plantation and N. Palm Beach, has stopped funding existing Florida mortgages and accepting new business.

For now, Home 123 offices remain open as employees work to find new Florida mortgage company financing for clients and arranging for closing agents to refund money they might be holding.

New Century last week disclosed a criminal investigation related to the trading of its securities and accounting procedures. The New York Stock Exchange suspended trading in the stock and took steps to delist it.

South Florida mortgage lenders, particularly smaller firms, could be scrambling amid the meltdown in the subprime market, experts say.

Subprime home loan lenders enter into agreements with bigger banks to finance their operations, but banks now fear a wave of delinquencies and tightening lending standards.

“You are going to see companies fold,” said Mike Larson, a housing analyst with Weiss Research in Jupiter. “When the end investors decide they don’t want this high-risk stuff, it reverberates throughout the food chain.”

Analysts say bad credit Florida mortgage lending has a much bigger share of the South Florida market than the rest of the sate, as well as the nation as a whole - the U.S. average is 14.7 percent of all mortgages outstanding at the end of 2006.

In Broward County, 18.4 percent of Florida mortgage loans are “subprime,” while Palm Beach County has 13.3 percent of its loans in that category. Miami-Dade has the biggest share of subprime loans in the region at 23 percent.

So far, South Florida’s troubled loans aren’t as big of an issue as in the rest of the nation, where payments were 60 days late on 11.8 percent of subprime and Alt-A loans, according to LoanPerformance.

In Palm Beach County, 9.3 percent of subprime loans were 60 days late or more. In Broward, 8.9 percent of the loans were late, while Miami-Dade County’s rate was 8.3 percent.

“Once it’s 60 days late, your ears perk up and you know this borrower is in trouble,” said Bob Visini, a spokesman for LoanPerformance.

SOURCE: Fort Lauderdale Sun-Sentinel