American Home Sees MSR Loss

American Home Investment Corp. here said its loan servicing business took a loss in the first quarter.

Declining interest rates during much of the period caused it to take amortization and impairment charges totaling $19.9 million on a pretax basis. However, this did create a tax benefit of $8.2 million, resulting in an after-tax expense for American Home of $11.7 million.

American Home said given the current interest rate trend, it expects amortization to slow and therefore should recover its impairment reserve net of taxes during the second quarter. Its total servicing portfolio as of March 31, 2004 was $10.3 billion, up from $8.9 billion one year earlier. Its weighted average note rate declined from 6.67% to 5.58%, the weighted average service fee went from almost 35 basis points to just over 36 basis points and the average age fell from 36 months to 26 months. Besides the impairment reversal, servicing-fee income is expected to increase throughout the year as American Home securitizes its adjustable-rate mortgage production and holds on to the servicing rights. The company added it is raising its guidance for the year to $3.25 to $3.40 per share.

Overall, the company reported first-quarter earnings of $21.2 million, an increase of 30% over the $16.3 million earned in the first quarter of 2003. Its earnings per share however declined during the same timeframe to $0.70 per share from $0.96 per share. In the fourth quarter of last year, American Home converted to a real estate investment trust structure as the result of a merger.

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