CashCall now makes its own call for cash

With Gary Coleman as its TV pitchman, CashCall promises money in a hurry to people who are low on cash.

But now the Fountain Valley lender is in the same bind as its customers.

The company stopped making loans this week and was scrambling to negotiate an infusion of capital so it can resume business, said Daniel Baren, the company's general counsel. CashCall also laid off about 80 of its 1,200 employees, he said.

"The reason we had to stop originating is because of the same liquidity squeeze that's affecting everybody else," Baren said. "We are doing everything we can to get back to normal as soon as possible, and we are fairly optimistic that will happen."

CashCall's website isn't quite as informative, making no mention of the liquidity problem.

"The site is down for routine maintenance. Please try again later," the website says.

Baren said the website was being revamped and that CashCall hopes that it will resume limited operations in California as early as today.

However, the company will not immediately resume originating loans for out-of-state borrowers, he said.

The final loans in its pipeline were funded on Monday, Baren said.

Lee Eakin found out that the CashCall spigot had run dry late Tuesday. The owner of Big Lee Bail Bonds in San Jose said he frequently referred cash-strapped clients to the company.

But when he called to inquire about loans on Tuesday, company representatives said they weren't making loans and didn't know when they might again.

"Our lenders are dropping like flies," Eakin said. "It's an overnight sensation."

CashCall's troubles are another sign that the lending crisis has spread beyond sub-prime lenders who made mortgage loans to people with shaky credit.

Rising defaults have forced many of these lenders out of business. In recent weeks, the financing crunch has spread and widened, stalling the market for high-quality corporate debt, as well as the market for large mortgage loans for credit-worthy borrowers.

All of these loans are largely financed by private investors, who buy shares in debt "pools" put together by big investment banking firms on Wall Street. Without cash from these investors, liquidity on Wall Street has dried to a trickle, leaving lenders and consumers short of cash.

CashCall was founded in 2003 by John Paul Reddam, who also founded (and later sold) Costa Mesa mortgage lender DiTech Funding Corp. Reddam has said in past interviews that he had gotten the idea for CashCall at DiTech, where the company would make second mortgages not backed by the home's equity.