Delta Reports Net Loss of $4.9MM

Delta Financial Corp., Woodbury, N.Y., has reported a net loss of $4.9 million ($0.32 per share) for the second quarter, compared with a net income of $7.2 million ($0.47 per share) a year ago.The net loss is "the direct result of fair value adjustments the company made to its residual...and servicing assets by increasing the prepayment assumptions it uses in valuing these assets," Delta said. The assumptions were changed from a 12-month ramp to "a vector curve with a peak speed of 31% for fixed-rate mortgages and 50% for adjustable-rate mortgages," the company reported. Hugh Miller, Delta's president and CEO, attributed the increase in prepayments to low interest rates and a flattened yield curve. "While we are not convinced that the current interest rate environment will continue unabated and believe that the spike in prepayments may only be a short-term event," Delta decided it was "prudent" to adjust its prepayment assumptions, he said. "It is important to note that the recent spike in prepayments...has occurred predominantly in our older pools and mostly for our adjustable-rate mortgages, neither of which represent a significant portion of our residual asset," Mr. Miller said. Delta's website address is http://www.deltafinancial.com.