Friedman Billings Ramsey, Arlington, Va., said its First NLC nonconforming mortgage subsidiary lost $1.8 million on a pretax basis in the fourth quarter 2006.First NLC built additional reserves related to the industrywide issue of buybacks as a result of early payment defaults. During the quarter, First NLC had $2.1 billion in originations, giving it $7.5 billion for the year. This compares with $1.5 billion and $6 billion for the same periods, respectively, in 2005. Cost to originate fell from an average of 244 basis points in 2005 to 191 bps for last year. FBR's merchant banking unit said it wrote down $17.2 million in the value of certain nonprime mortgage company investments. The largest was a $13.7 million reduction in the carrying value of shares in Fieldstone Investment Corp., which is being sold to C-BASS for cash. FBR said its merchant banking investments in nonprime companies, excluding Fieldstone, was $19 million at the end of 2006.

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