LENDER TO ABOLISH WHOLESALE DIVISION.Byline: Deborah Adamson Daily News Staff Writer Amid turmoil in the subprime lending  This article or section may deal primarily with the U.S. and may not present a worldwide view. market, PacificAmerica Money
Center is discontinuing its wholesale loan division, which accounted for
75 percent of its business, the company announced Tuesday.
The mortgage lender, a specialist in loans to people with credit problems, said it will focus instead on its retail loan division. Wholesale loans accounted for $235 million in revenue vs. $86 million from retail loans for the quarter that ended Sept. 30, the mortgage lender said. The company expects to take a big hit in fourth-quarter financial results. Shares of PacificAmerica dropped 18.75 cents to 93.75 cents Tuesday. A drop in loan volume has a direct impact on revenues. The company makes money from the spread between the loan interest that homeowners pay and the interest that it pays investors in these securities. The wholesale loan division has been hurt by uncertainty in the subprime market as securities investors flee flee v. fled , flee·ing, flees v.intr. 1. To run away, as from trouble or danger: fled from the house into the night. 2. to the safety of Treasury bonds and other government paper. In wholesale, PacificAmerica makes money by selling the paper on loans made to individuals with credit problems as rebundled securities. These securities are sold to investors such as insurance companies, pension funds and others. But the global economic crisis has made investors wary about riskier investments, drying up demand for subprime securities, said G.U. Krueger, deputy chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the at the California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). Association of Realtors. Since mortgage lenders also typically borrow the money they lend out, these companies are caught in a crunch (1) To process data. See number crunching. (2) To compress data. See data compression. 1. (jargon) crunch - To process, usually in a time-consuming or complicated way. between low demand for subprime securities and pressure to repay what they have borrowed, he said. Nor is new borrowing readily available for these lenders, Krueger said. ``Some of the money used to warehouse those loans has dried up,'' he said. Problems with the subprime lending market also derailed PacificAmerica's merger with Fremont General Corp. in Santa Monica Santa Monica (săn`tə mŏn`ĭkə), city (1990 pop. 86,905), Los Angeles co., S Calif., on Santa Monica Bay; inc. 1886. Tourism and retailing are important, and the city has motion-picture, biotechnology, and software industries. earlier this month. Over the last 12 months, PacificAmerica's shares have dropped 97 percent from a high of $27.75. It now has a market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. of $4.8 million. PacificAmerica executives declined to comment. |
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