Summit finds financing for pending mortgages
Massachusetts banking regulators said yesterday that Summit Mortgage Corp. has lined up alternative financing for 270 homeowners and buyers who lost their mortgages when the lender closed its doors Thursday.
Summit Mortgage, which generated $1.3 billion loans in 2006, is the largest lender based in Boston to collapse as a result of the nationwide credit crunch.
Richard Fedele, who founded Summit in 1996, said yesterday he laid off all but a handful of 140 employees in nine offices Thursday, and the company quit accepting new applications for mortgages.
"As a result of the credit market's meltdown in August, we could no longer make a go of it," he said.
David Cotney, chief operating officer for the Massachusetts Division of Banks, said Summit notified his office Thursday of the closing. Details of Summit's closing were reported in the Boston Herald yesterday.
Summit also said it reached tentative agreements with three lenders to take over the loans it was unable to fund, Cotney said.
"We'll be looking to ensure every one of the 270 people who have a loan commitment get to a closing," he said. "If there are consumers out there who don't get taken care of, we want to know about that," he said.
Summit's closing comes on the heels of shutdowns by several large national lenders, including New Century Corp., and numerous small firms.
Robert French, a loan officer with Greenpark Mortgage in Needham, said Summit may have also struggled because of high overhead for its downtown offices, including one in the financial district and one on Boylston Street.
"It could happen to a small lender, too," French said, adding, "September was a really tough month."
Fedele said Summit Mortgage was on pace this year to match its 2006 loan volume, until "the credit markets took its toll in August and September."
Credit markets were roiled this summer when investment portfolios loaded with mortgage-related securities dropped precipitously in value as foreclosures of many of the underlying loans in those portfolios mounted. Investors that typically provided funds for mortgage companies such as Summit balked, leading to a shortage of capital that forced many lenders to cut back operations.
Fedele said funds for low- or no-documentation loans in particular were hard to get, and overall demand for all types of loans dropped substantially. Interest rates also increased for jumbo mortgages - those over $417,000 - which are not purchased by Freddie Mac and Fannie Mae, the two largest US mortgage investors.
"Anything that was not Fannie Mae or Freddie Mac, the pricing and products went away," he said.
Kimberly Blanton can be reached at blanton@globe.com. 