ARMs Create a Challenge for Downey Financial
Mortgage lender Downey Financial saw its nonperforming assets increase to $388 million at the end of October, a 50% jump in just three months time.
The California-based thrift -- a big player in the ARM market -- reported that 2.74% of its $14.18 billion in assets were nonperforming at the end of October compared to 1.77% at the end of July. (At the end of July it had reported assets of $14.66 billion.)
In a research note, Credit Suisse said, "With ARM resets looming, coupled with declining home prices, borrowers are finding it much more difficult to refinance existing loans, exacerbating Downey's delinquency problem."
Among residential funders, Downey ranks 43rd in the U.S., according to the Quarterly Data Report, a National Mortgage News publication.
The CS research note was written before it was revealed that a firm controlled by billionaire investor Gerald J. Ford (a former thrift executive himself) had taken a 6.8% stake in Downey.
When news of the investment leaked out last week, Downey's shares shot up 14% on the day. In a regulatory filing, Hilltop Holdings Inc., a company chaired by Mr. Ford, now owns 1.89 million shares of Downey. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/