Lydian Mortgage - Wholesale - "A" paper

Update - 2008-02-20: Emails received today point to Friday as the final day for Lydian Mortgage. It appears there are less than 49 people who might be affected by a shutdown if it were to happen.

We compared Lydian's Rate sheet with another major Wholesale company. Looking at your basic Fannie 30-year fixed (unadjusted), Lydian's prices were almost 1.5 points out of the market. On today's single-page sheet, a 30-yr fixed at 6.000% has a half-point cost while Flagstar returns over 1% rebate. How is an AE supposed to walk into a Broker's office and pick up any business with pricing like that?

We believe it's time for some announcements to be forth coming from Lydian Mortgage.

Original Ailing/Watch Listing - 2008-02-19: We have been 'Watching' this company. Lydian Mortgage (aka Virtual Bank Mortgage) is fine-tuning its broker-base with a zero-tolerance policy for fraud and tightened pull-through requirements for loans that are locked. Today, a tipster wrote:

"You may want to follow up with them. Friday 2/15/2008 they cancelled most of their locks and cut off most wholesale accounts."

A couple of AE's we spoke with confirmed the lock cancellations and acknowledged there were a number of broker terminations resulting from a policy change that went into effect on 2008-02-01, requiring a lock-to-fund pull-through ratio of 70%. Companies whose ratio falls below 35% are being suspended. There is also a 5-day delivery requirement for new locks, and brokers who fail to deliver even just one loan in that time frame are also being dropped.

One tip reportedly from "high up" states, "a few bad hedges took them down..."

In another tip from the inside:

"...and they are pulling approved loans and simply withdrawing them if they are locked or not. Lydian, quite plainly, has absolutely no regard for brokers. They were limping last week and are now in a full scale wobble at this point."

Lydian cut back its product offerings at the end of 2007, as noted by one forum poster:

"Effective 12/31/07 we will suspend some programs to better serve you.

We are suspending the following programs:

• Gold - [Jumbo]
• Portfolio - [Alt A - 2, 3 and 5-yr ARM's]
• Gold Choice - [Jumbo ARM's]
• Portfolio Choice - [Alt A Option ARM's]
• Gold Heloc - [Piggyback Seconds]
• Portfolio Heloc - [Alt A HELOC's]
• 5yr Pay Option arm.

Your loans MUST be locked no later than 11/30/07 and MUST funded no later than 12/31/07. All loans must fund within their original lock period. No lock extensions will be granted."

AE's told us they are only offering FNMA Full-doc products; the rate sheet they have posted for today's date confirms it. We heard that they are trying to get set up with Freddie Mac for their Alt-A products. There are no FHA or Gov't. products on the rate sheet. In fact, our comparision today of their rates show they are priced out-of-the-market by about 1 point! You can't expect to get business in the door that way.

There was a round of layoffs in August 2007, as briefly reported in the Palm Beach Post. AE's are being kept in the dark and not even sure of the current headcount; volume information for recent months was not disclosed. December 2007 volume was reportedly around $80 million.

Lydian Mortgage is a wholly owned subsidiary of Palm Beach Gardens, FL based Lydian Private Bank. Public records indicate a Class Action Complaint was filed against Virtualbank, Lydian Trust Company, Lydian Private Bank, et al on 2008-01-11 for alleged violations of TILA and the California Business and Professions Code in connection with certain Option ARM's.

The best discussion-group and more information is on our forum thread here. Email us if you have additional information or updates on this Lender.