Irwin Advises of MSR Impairment

Irwin Financial Corporation, Columbus, Indiana, said it expects to report net impairment of about $27 million against its mortgage servicing rights for the second quarter.The pre-tax 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, the company said. 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 pre-tax 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 would be about $20 billion after the sales, down from $29 billion a year earlier.