Irwin Advises Of Impairment

Noting a sharp drop in 10-year Treasury rates during the second quarter, Irwin Financial Corp. here said it expects to report net impairment of about $27 million against its mortgage servicing rights for the second quarter.

The pretax impairment charge reflects the difficulty of hedging MSRs under Irwin's accounting methods and a decline of about 60 basis points in the 10-year Treasury rate during the quarter, the company said. The continued flat yield curve in the bond market hampered option-based hedging as well.

To reduce the risk of continued MSR impairment, Irwin said it sold servicing rights on $3.2 billion of home loans in bulk trades, resulting in a pretax gain on sale of about $7 million during the quarter. MSRs on another $1.6 billion of loans were sold on a flow basis. Irwin said its MSR portfolio will be about $20 billion after the sales, down from $29 billion a year earlier.

Irwin, a bank holding company focused on servicing the mortgage banking, small business and home-equity lending markets, said that despite the mortgage business, its other operations, including commercial and home-equity portfolio loan growth and overall credit quality, met expectations during the second quarter.

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