Nonconforming REIT Takes Loss

ECC Capital Corp., Irvine, Calif., reported a net loss of $38.7 million ($0.40 per share) for the second quarter compared with net income of $11.9 million ($0.28 per share) for the same period in 2004.ECC is a real estate investment trust that originates nonconforming mortgage loans. The company took a $29.3 million loss on derivatives. A statement from ECC said those losses "reflect a flattening of the yield curve that reduced expected future cash flows from the company's derivative contracts." However since the quarter ended, a shift in the forward curve now gives ECC's hedge position a year-to-date gain of $25 million. ECC president and co-chief executive Shabi Asghar said the company remains "on track." A key achievement during the quarter includes an increase of $1.3 billion in REIT portfolio assets.