Loan losses continue to mount for Newport Beach-based thrift operator Downey Financial Corp.
Downey said 10.93% of its loans were in default at the end of February, up from 9.14% at the end of January.
Its stock was off nearly 5% in midday New York Trading, giving it a market value of about $500 million.
Loans Downey renegotiated with borrowers rose to 4.30% from 3.59% and are considered under default by its accounting terms.
The company has been dealing with borrowers unable to make payments on adjustable rate home loans, which reset at higher payments after an initial period.
Typical resets happen two years after the start of a loan, with rates increasing by about 30%. The majority of Downey’s loan portfolio are option ARM mortgages.
Downey, with $13.4 billion in assets, did $75.7 million in home loans for the 13 months ended February. This is down from $127.4 for the 13 months ended January.
It said it sold $90 million in loans for February, up from $64.1 million for January.
A year ago, the company had $15.5 billion in assets, with less than 1% of its portfolio in default.
In January the company said it lost $109 million in the fourth quarter compared to a profit of $52 million a year earlier.
It also said set aside $218 million from earnings to cushion itself against future defaults.
