Ever hear of LoanCity? Me neither. It's a privately held wholesale mortgage lender based in San Jose that stopped funding loans on Tuesday - and the thing is, it's not a subprimer. Borrowers generally have good credit scores (not great but better than subprime), but credit has tightened throughout the mortgage biz and that's putting the squeeze on everybody. "We just didnít have the capital to withstand the continuing of the credit crunch," LoanCity CEO Rick Soukoulis told Marketbeat. The San Jose-based company closed its five remaining offices this week. The irony, says Soukoulis, is that LoanCity lost a bunch of business last year because it deliberately stayed out of the subprime business. From the San Jose Mercury:
The company did not have enough working capital to adjust to the "warehouse" banks' new requirements, Soukoulis said. Whereas six months ago a warehouse lender bank might have provided LoanCity with 99 percent of the funds to make each mortgage, nowadays the lender might hand over just 98 percent, and LoanCity needed to come up with the balance until that loan was eventually sold on the secondary market. With the volume of business LoanCity had, the increase was too much to handle, Soukoulis said. When it announced Tuesday that it had ceased funding loans, LoanCity had about 1,200 mortgages nationwide that were were in various stages of approval but had not been funded. Those were worth about $350 million, Soukoulis said. The affected customers will be assisted by CMG Mortgage Services, based in San Ramon.