Sub-Prime Lenders Hit by U.S. Housing Slump?
The slump in the U.S. housing market is having a major impact on the risky sub-prime loan business--and on the big financial firms that invest in it. CNBC's Steve Liesman had the details on "Power Lunch." Liesman said that Fitch Ratings has placed the mortgage service business Ameriquest--the nation's biggest private mortgage company--on what Fitch calls "ratings watch evolving." The downgrade came a day after Ownit--a medium sized subprime lender-- shut its doors.
The company--formally known as AMC Mortgage Services--is said to be "experiencing financial pressures" as delinquencies rise in the sub-prime mortgage market.
Sub primes are loans with the lowest credit quality and often the highest risk. Ameriquest is the leader in the field with some $70 billion of originations.
Ameriquest has become well known for its advertisements touting its loans to the least qualified buyers. It was founded by California billionaire Roland E. Arnall--who was appointed last year as U.S. ambassador to the Netherlands by President George Bush.
Liesman says the company has been the subject of numerous class-actions suits--including those accusing it of predatory lending practices. The company paid $325 million to settle those claims in January--without admitting any wrong doing.