“To All HMIC Business Partners,

It is with deep regret that we announce Harbourton Mortgage Investment Corporation will cease operations effective the close of business today, December 20th, 2006.

We are extremely proud to have had the opportunity to serve our Brokers, Investors and Business Partners and wish everyone much success in the future.”

For the quarter ended September 30, 2006, HMIC recorded a provision for losses of $954,000 in response to a significant increase in the loans sold to investors that experienced an early payment default, under which HMIC may have liability to the investor. HMIC recorded a loss for the quarter ended September 30 of $1.19 million excluding the provision for losses and approximately $260,000 of one time expenses directly related to the MAW acquisition.

Harbourton Mortgage, a national Alt-B, Alt-A and subprime wholesale mortgage lender, originated $785 million in loans during the past year (a/o mid-2006).

I’m starting to wonder if there isn’t much more mortgage fraud out there than is generally realized. I saw a number that 35% of early defaults were fraud related, but that was from older data. The 2006 crop of subprime mortgages is performing much worse than any previous crop, and I’m starting to suspect that much of the difference is cash-back fraud. In this business model, the crook arranges to buy a house at a high price in return for an off-the-record agreement for the seller to return cash after the closing, nominally for “renovations” or something similar. A cooperative or ignorant appraiser provides the right numbers and 100% financing provides the cash. Using no-doc “liar’s loans” and a bit of identity theft makes it easy for the borrower to disappear without making even the first payment. Of course it is usually a lot harder for the seller to disappear and he or she is complicit in the fraud.