Mortgage and Real Estate Blog

E-loan to exit mortgage business

US-based online lending platform E-loan is to quit the mortgage origination business after posting an $87.4 million net loss in the third quarter.

The company, started in 1997, and a big player in the online mortgage lending business, is operated by Puerto Rica-based Popular Inc and its North American subsidiary Banco Popular, which reported a reported a third-quarter net loss of $139 million.

Popular, Inc. has made the decision that E-LOAN will no longer operate as a direct mortgage lender in 2009.

Employees have been given 60 days' notice of layoff, and that E-Loan will cease operations as of January 9, 2009, according to multiple sources. Some processing staff will remain to close-out existing loans. It is not clear how many employees will be affected.

In a statement, the company said the closing of its US banking operations was a response to the economic downturn. Banco Popular intends to shut down at least 40 branches in its 139-strong national network as it seeks to boost its capital position and clean up its subprime-hit balance sheet.

The closure of the E-loan mortgage book to new business is expected to save $37 million annually. The company says E-loan will continue to service outstanding loans, and offer FDIC-insured certificates of deposits and savings accounts.

In light of the significant changes and challenges in the mortgage industry, the company cut over 500 jobs as part of a restructuring plan in November 2007 in an effort to focus on loans only eligible for repurchase by Fannie Mae and Freddie Mac.

The company has already suspended the acceptance of new "Home Equity" Wholesale loan applications.

Customers who have already obtained loans through E-LOAN will not be affected.

Find out the status of lenders nationwide with the popular website "Mortgage Lender Implode-O-Meter" at http://ml-implode.com

DETAILS OF $7,500 TAX CREDIT Now Available to First-Time Home Buyers:  Learn more at www.JoeMetzler.com 

Not buying a home? Please PASS THIS INFORMATION ALONG TO EVERYONE YOU KNOW WHO MAY BENEFIT

There is no need to fill out an application to qualify for the tax credit. First-time homebuyers merely claim the credit when filing the tax return for that year.

NO PRE-APPROVAL REQUIRED, but if you are relying on this program to purchase a home you may want to check your eligibility.

HERE ARE SOME BASIC FACTS: The credit is available only to first-time home buyers defined as buyers who have not owned a principal residence for three-years prior to the subject purchase. The ownership test applies to both partners in a marriage; i.e. if a husband has not owned a home in the past three years but the wife has, neither spouse qualifies for the first-time home buyer tax credit. (It appears that this would be the case even if the husband is purchasing the property only in his own name.) A buyer can still be eligible for the credit even if he owns a vacation home or rental property not used as a principal residence.

Single taxpayers with "modified adjusted gross income" up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Individuals and couples with incomes above the thresholds may still qualify for a lesser credit, however, taxpayers with adjusted gross income above $95,000/ $170,000 phase out of the program completely.

Your tax advisor may be able to help you with this. The credit is available even to those with little or no federal income tax liability to offset. This usually means that the government will send a check for part or all of the credit. Otherwise the credit is used to offset any unpaid taxes or increase a refund.

The credit is available for homes purchased between April 9, 2008 and July 1, 2009 and applies to both new and existing homes whether attached or detached, condominiums, mobile homes, or houseboats. A homebuyer contracting for a custom built home can qualify for the credit as long as the home is first occupied between the April 2008/June 2009 dates. (For newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.) The $7,500 credit represents 10 percent of the purchase price of a low cost home.

That the tax credit is not a gift or a grant but essentially a 15 year loan to the homebuyer and, while it is interest free, will require filing a tax return and will carry the same IRS penalties for non-payment as accrue to delinquent taxes. Most who use the program will be able to claim this full amount, however, in the event a home is purchased for a lesser amount, the 10 percent cap will apply. That would mean that a $65,000 purchase would result in a $6,500 credit.

There are other refinements to the program. For example, if it is to his benefit, a taxpayer can apply for the credit in a different year than the home is purchased. There is also a possible forgiveness of debt for homeowners who sell the home before the loan is repaid and do not received sufficient gain from the sale to cover the loan balance.