Shares of Newport Beach-based savings and loan operator Downey Financial Corp. fell Friday after the company reported another rise in bad mortgages.
The company said that mortgages in default or close to it were 3.65% of its portfolio in November, up from 2.74% in October.
The figure has been steadily climbing from 2.25% in September and 1.96% in August.
Downey’s assets fell 5% from October to $13.5 billion.
The majority of Downey’s loans are adjustable-rate mortgages that were made to people with less than great credit, but better than the riskiest subprime borrowers.
The loans, known as option ARMs, allow borrowers to pay credit card-style minimum payments with the difference tacked onto the balance of the loan.
The loans switch to a higher rate after two years, putting payments out of reach for some borrowers.
The company’s shares were off about 6% in midday New York trading with a market value of $860 million.
