FirstFed Financial Corp., parent to First Federal Bank of California, said Friday that mortgage losses likely led to a 64 percent drop in quarterly earnings at the Santa Monica, Calif.-based holding company. On a preliminary basis, fourth-quarter net income was reported at $8.4 million, or $.61 per share, compared to $33.4 million, or $1.97 per share, in the year-ago period. Delinquencies and non-accruals — non-accruals refer to severe delinquencies 90+ days in arrears or in foreclosure — have been skyrocketing at FirstFed. The bank reported that single-family non-accruals jumped to $179.7 million in Q4, up a stunning 116 percent from the third quarter alone. Delinquencies less than 90 days among single family loans rose to $236.7 million by the end of Q4 — that’s 231 percent over the $71.5 million recorded just one quarter earlier. The bank had first warned of delinquency problems during the fourth quarter on January 15. Against such staggering rises in both delinquencies and non-accruals, FirstFed said total allowances for loan losses reached just $128.1 million at year’s end, net of provision expense and charge-off activity; that’s a rise of just 16 percent in loss reserves relative to the $109.8 million on the books at the end of last year. Not surprisingly, FirstFed said that option ARMs hitting a forced recapitalization were “a contributing factor in the higher level of delinquent loans.” During the fourth quarter of 2007, just over 1,800 borrowers, with loan balances of approximately $830 million, reached their maximum level of negative amortization and had a resulting increase in their required payment. The bank said that it estimated that another 2,400 loans totaling approximately $1.1 billion could hit their maximum allowable negative amortization during 2008. (To make it clear: that’s $1.9 billion in forced resets against just $128.1 million currently reserved for loan losses.) FirstFed holds a portfolio of $3.2 billion in one-year adjustable rate mortgages, including payment option mortgages; it holds another $1.1 billion in three-to-five year ARMs (also including payment option products). Hinting at how the drop in California home prices is affecting servicing operations, FirstFed said it wrote down $2.4 million of $21 million in REO inventory. REO has skyrocketed at FirstFed as well; the bank held just $1.1 million in REO one year ago. For more information, visit http://www.firstfedca.com.
Most Popular Articles
Here are the 10 housing markets that the National Association of Realtors expects to the hottest in the nation in the next three to five years.
In an interview with HousingWire, RealPage Chief Economist Greg Willett said the apartment market is in great shape, and even the luxury market will see competition in 2020.