US lenders rumoured to be pulling out

Rumours are rife that Preferred Mortgages, Southern Pacific Mortgage Limited and Mortgages PLC will cease trading within weeks.

Lehman Brothers refused to comment on rumours that Preferred and SPML had already shut up shop.

Although sources say both lenders will close, Capstone Mortgages will continue to service existing business.

Meanwhile, Merrill Lynch, parent of MPLC and Wave, last week announced 4,000 jobs cuts while revealing an additional $4.5bn in write-downs connected to US sub-prime deals.

Merrill was unavailable for comment on the future of MPLC and Wave but sources close to the investment bank say the former is likely to close at the end of April while the latter’s future remains unknown.

One source says that MPLC held a board meeting earlier this month at which directors were told the company would cease to trade at the end of April. Last week Rooftop Mortgages, a subsidiary of US investment bank Bear Stearns, ceased operations.

Ginny Darrow, chief executive of Rooftop, says: “Market conditions have continued to deteriorate and with no signs of recovery in the securitisation and whole loan trading markets that underpin our strategy, our origination business has become unsustainable.”

Darrow’s comments followed those made by edeus chief executive Michael Bolton, who admitted his lender’s business model does not work in the prevailing market conditions.

Meanwhile, Citigroup revealed net losses of $5.1bn for Q1 2008 but says it is committed to its UK subsidiary Future Mortgages.

Future re-entered secured lending last week after a weekend hiatus to review its product criteria and position in the sector.