Neg Am Loans Problem for FirstFed

FirstFed Financial Corp., Los Angeles, which recently shut its mortgage wholesale production operations, lost $244.8 million ($17.91 per share) in the fourth quarter of 2008 because of a $220 million provision for loan losses. The company is now operating under an Office of Thrift Supervision cease and desist order. Its level of delinquent mortgage loans was affected by adjustable-rate mortgages which had reached their maximum allowable negative amortization and required an increased payment. In 2008, there were 1,741 loans with a total balance of $802.3 million that were scheduled to recast; in 2009, there are an additional 913 loans, with a total balance of $396 million set to recast. FirstFed chief executive Babette Heimbuch said "we are focused on modifying our adjustable-rate loans where possible so that borrower payments are affordable and stable." The company has $403.8 million in non-accrual single-family mortgage loans as of the end of last year, down from $445.2 million at the end of the third quarter.