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Citi, HSBC among biggest subprime loan originators

May 11, 2009 14:09 IST

As the world continues to reel under the financial turmoil that started with risky subprime lending, a new study has found that Citigroup, HSBC and AIG are among the 25 biggest originators of such loans worth about $1 trillion.

The study conducted by the US-based non profit organisation Center for Public Integrity has revealed that these 25 entities accounted for a whopping 72 per cent of subprime loans during the 2005-07 period.

Topping the list is Countrywide Financial Corp which shelled out subprime loans worth $97.2 billion while CitiFinancial/Citigroup Inc' is at the 16th place and had generated $26.3 billion in such loans.

At the ninth spot, HSBC Finance Corp/HSBC Holdings Plc had raised $50.3 billion in subprime loans. According to the study, the entity has stopped lending now.

American General Finance Inc/American International Group, with $21.8 billion subprime loans, was ranked 18th.

Wells Fargo placed at the eighth position which raised $51.8 billion in high risk loans.

". . . the top 25 originators of the high-interest loans, accounting for nearly $1 trillion and about 72 per cent of industry-reported subprime loans during that period (2005-07)," the CPI said.

The study is based on the analysis of government data on nearly 7.2 million 'high-interest' or subprime loans made from 2005 through 2007 -- a period marked 'the peak and the collapse of the subprime bottom'.

During that period, Ameriquest Mortgage Co/Acc Capital Holdings Corp, which is at the second spot, raised $80.6 billion in subprime loans, followed by New Century Financial Corp ($75.9 billion), First Franklin Corp/National City Corp/Merrill Lynch ($68 billion), Long Beach Mortgage Co/Washington Mutual ($65.2 billion).

"The top subprime lenders whose loans are largely blamed for triggering the global economic meltdown were owned or backed by giant banks now collecting billions of dollars in bailout money -- including several that have paid huge fines to settle predatory lending charges," the report said.

Going by the study, at least 21 of the top 25 subprime lenders were financed by banks that received bailout money -- through direct ownership, credit agreements, or huge purchases of loans for securitisation.

The Centre said banks that funded the subprime industry were not victims of an unforeseen financial collapse, "as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending threatening the financial system".

Meanwhile, 20 of the top 25 subprime lenders have closed, or stopped lending, or been sold to avoid bankruptcy. Most were non-bank lenders, it added.

Other names in the list include WMC Mortgage Corp/General Electric Co ($49.6 billion), BNC Mortgage Inc/Lehman Brothers ($47.6 billion), IndyMac Bancorp ($26.4 billion), and Wachovia Corp ($17.6 billion).

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