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Mortgage Company ECC Posts Loss

Irvine-based subprime lender ECC Capital Corp. reported a second-quarter loss of $39 million on Friday.

The loss stemmed from higher operating expenses, a decline in the value of derivative investments and less revenue from selling loans.

The company made $12 million in profit for the same period last year.

Most of the loss resulted from a $29 million unrealized charge from a decline in the value of its derivates. They are used to offset risk from sudden changes in interest rates.

The lender said the value of its derivates has gone up since the quarter closed on June 30.

ECC also lost money in the first quarter. Its total loss so far this year is $41 million.

The company said operating expenses rose 30% from the first quarter as it added workers.

ECC hired 400 workers in the second quarter, including 190 loan officers and account executives. The lender employed a total of 1,509 workers in June.

The company said its loan sales lately are minimal, as it builds its portfolio of loans.

Mortgage companies are under strain as the Federal Reserve Bank continues to raise short-term rates. Mortgage companies turn around and sell loans as bonds, with the yield tied to short-term rates. As those rates rise, mortgage companies have to pay more to investors.

Newport Beach-based Impac Mortgage Holdings Inc. also reported a loss in the second-quarter, due to an unrealized drop in the value of its derivates. Its income available to shareholders also declined.

Irvine-based subprime lender New Century Financial Corp. reported a 40% decline in its profits for the period.

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