Orange County’s slumping subprime mortgage sector took another hit on Thursday, led by an analyst’s downgrade of Irvine’s New Century Financial Corp. and Impac Mortgage Holdings Inc. of Newport Beach.
The pessimistic research report largely was behind the declines for the two companies, whose shares closed down nearly 3%.
It continued a bad news week for the county’s subprime loan industry, which makes loans for customers with imperfect credit.
UBS analyst Omotayo Okusanyo downgraded both companies to “reduce” from “neutral,” while slashing earnings projections and dividend outlooks.
“We believe that a combination of rising rates, an inverted yield curve, slowing economy and worsening credit represents a perfect storm for the non-prime mortgage space,” Okusanyo said in a research report.
It “appears that all these headwinds are likely to hit the sector simultaneously over the next few quarters,” the report said.
In other news, Kansas City-based H & R; Block Inc. said Thursday its quarterly loss more than quadrupled, largely because of trouble at its Irvine-based Option One Mortgage Corp. mortgage unit.
More customers of Option One’s subprime division are falling behind on payments than had been expected, the company said.
Also on Thursday, Consumer Portfolio Services Inc., an Irvine-based auto loan company that serves subprime customers, said it was postponing a secondary stock offering indefinitely due to unfavorable market conditions.
The company was hoping to raise up to $10.2 million.
Consumer Portfolio “believes the market has overreacted to consumer credit fears, specifically in the subprime industry, and that the current stock price significantly undervalues the cmpany and potential of our business,” Chief Executive Charles Bradley Jr., said in a statement.
