Mortgage industry orphaned

NEW YORK – For the mortgage industry, Wall Street’s big investment banks might seem like one of those friends who disappear when the going gets tough.

It wasn’t that long ago that the investment houses, looking for ways to cash in on the then-booming housing industry, were buying mortgage lenders at a frenetic pace.

The story now is quite different. This past week, 1,200 people lost their jobs after Lehman Brothers Holdings Inc. closed subprime-lending unit BNC Mortgage LLC, a company it fully acquired in 2004. Similar steps are expected as investment banks try to erase any connection with loans to borrowers with weak credit.

“The mortgage industry has always viewed Wall Street as fair-weather friends, active when things are good and abandoned when times are bad,” said Guy Cecala, publisher of trade publication Inside Mortgage Finance. “We’re just at the beginning of them pulling away from mortgage operations, and the ones that are not closed down will be cut back severely.”

Cecala, whose subscriber base is dwindling as mortgage bankers are laid off, said the investment banks are mostly looking after their image on the Street – shedding these mortgage units is an easy way to bolster investor confidence. Many of the takeovers were completed at bargain prices, and unwinding them will have little impact on earnings.