Delta Financial Execs Plan New Mortgage Venture
The execs of now-defunct subprime lender Delta Financial Corp. are planning a comeback, according to former Delta CEO Hugh Miller. A group of senior execs from the bankrupt lender are forming Reliance First Capital, LLC, with an eye towards FHA lending as well as some "alternative products," Miller said in a notice posted to former employees on a company Web site. "We are starting the company from scratch, which means we will need to obtain various state banking licenses and the like," Miller wrote at DFCConnect.com, a Web site used to communicate with former Delta employees. "As such, we will have only a very small group of employees for approximately the first six months while we are working on getting all set up." Delta Financial went bankrupt in late December of last year, after being one of the last independent subprime mortgage banking operations to survive the industry meltdown. The company was widely regarded as one of the more conservative subprime lenders in the industry, industry sources told HW at the time. Reliance will start in a "smaller capacity," Miller said, and is backed by $7 billion private equity fund Wexford Capital. "I needn't tell any of you that the markets are still in terrible condition," he said. Sources close to the company told Housing Wire Wednesday morning that Reliance will originate for FHA to start, while also offering a more limited array of third-party subprime products. The company's core executive team believes it knows how to manage risk in subprime lending, and that starting with a clean slate will provide the flexibility needed. Via Newsday, who also reported on the rebirth of Delta:
Dean Hartman, chief planning officer of Continental Home Loans in Melville, said Miller's "alternative products" sound like subprime, but it could work because most lenders have run away from subprime. "There's a void in the market," he said. "They can do pretty well if they're careful and not become cowboys again."It's certainly an intriguing idea, given that so many have written off subprime lending altogether: is there still a viable market in lending to those with less-than-perfect credit?