Mortgage Lenders Network USA, a large lender of subprime mortgages, says it has stopped accepting applications for new loans. It is "currently exploring strategic alternatives" for its wholesale business lines, according to telephone recordings on at least two of its four wholesale lending offices.

MLN, based in Middletown, Conn., which last year is reported to have lent more than $12 billion, is the fourth lender to withdraw from the subprime market in the last two weeks. Ownit Mortgage Solutions has declared bankruptcy and shut down, citing "the current unfavorable conditions of the mortgage industry." Also, Option One Mortgage, a unit of H&R Block Inc., and ACC Capital Corp., the private holding company for Ameriquest Mortgage Co. and affiliates, are both for sale.

All of these companies rely on investment banks to provide the capital for their loans. Merrill Lynch & Co., JPMorgan Chase & Co., Credit Suisse First Boston, among others, invest the cash through a line of credit, then turn the loans into bonds for sale to investors. As the subprime market has gone south, the bonds’ attractiveness has declined and potential buyers have run in the other direction. The bankers have demanded repayment, leaving the lenders out of money and facing bankruptcy.

Source: Associated Press, David Enrich (01/02/07)