Accredited Posts $37.8M Fourth Quarter Loss; Delinquencies Triple

Accredited Home Lenders Holding Co., a mortgage company specializing in subprime residential mortgage loans, said today that it lost $37.8 million during the fourth quarter of 2006; as a result, the company’s net income for the full year fell nearly 64 percent from one year ago, tumbling to $57.7 million from $155.4 million in 2005. The company also said it had increased loan reserves by $42 million during the fourth quarter, citing increasing delinquency trends and repurchase activity, while originations dropped 18 percent. “For the full year, Accredited achieved positive net income when a number of non-prime mortgage companies either posted losses or exited the business,” said chairman and CEO James Konrath. “Results for the fourth quarter were dissatisfying; however, during the quarter we absorbed the bulk of the impact of the Aames merger and continued responding to the current difficult credit environment.” “We spent much of the quarter completing the integration of Aames’ retail business and continued to implement changes to our underwriting guidelines, both of which negatively affected key profitability drivers such as volume, costs and premiums,” said Konrath. “We expect the time spent on these priorities will benefit the company in this challenging environment with a stronger retail franchise and improved portfolio performance.â€?

Accredited attributed the decrease in fourth quarter revenue to lower gain on sale premiums on loans sold, higher provisions for repurchases and lower net interest income, noting that net interest income after provision declined primarily due to lower spreads and increasing provision for losses on loans held for investment and REO. The company’s aquisition of Aames’ operations also moved operating expenses upward, Accredited said, increasing from $79.6 million in the fourth quarter of 2005 to $120.2 million in the fourth quarter of 2006. Originations dropped 18 percent to $3.9 billion in the fourth quarter, down from $4.7 billion in the same quarter one year ago. The company’s servicing portfolio grew nearly 14 percent during 2006, reaching $11.0 billion at the end of 2006, up from a reported $9.7 billion at the end of 2005. Delinquencies quickly rose Signaling potential problems ahead, delinquency rates at Accredited skyrocketed during the fourth quarter, both due to the acquisition of the Aames as well as through increases in Accredited’s original loan portfolio. Total portfolio delinquencies at year end in 2006 stood at 8.26 percent, more than triple the delinquency rate of 2.49 percent reported by the company at the end of 2005 and up from a reported 5.44 percent at the end of the third quarter. Excluding the impact of the Aames acquisition, Accredited saw its own delinquency rate reach 7.18 percent during the fourth quarter, a staggering 188 percent increase from levels reported one year ago. The company said it will not issue earnings guidance for 2007 because of the high level of uncertainty surrounding key external conditions that determine profitability, including possible acquisition activity. “While the current operating environment remains challenging,” Konrath said, “our seasoned management team, talented employees and bottom-line business model give us confidence that we will navigate successfully through the current conditions.â€? For more information, visit

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