Accredited Home Lenders to Sell $2.7 Billion of Loans (Update3)
By Kevin Foley
March 16 (Bloomberg) -- Accredited Home Lenders Holding Co., a U.S. mortgage lender to people with poor credit, agreed to sell $2.7 billion of loans to pay bankers who demanded cash to cover the risk of defaults.
The loans will be sold at a ``substantial discount'' to alleviate pressure from margin calls, the San Diego, California- based company said in a statement distributed by Business Wire today. Accredited didn't identify the buyer.
At least 20 so-called subprime lenders have closed in the U.S. and more are fighting for survival after a surge in defaults by customers. Former Federal Reserve Chairman Alan Greenspan said he expects fallout from the crisis to spread to other parts of the economy, especially if home prices decline.
``With the jitters we've seen in the subprime market, the ability to refinance debt has become increasingly difficult to the point where we may be seeing some forced liquidations of underlying assets,'' said Brian Johnson, a banking analyst at JPMorgan Chase & Co. in Sydney.
U.S. subprime borrowers fell behind on their mortgages at the highest rate in four years during the fourth quarter, the Mortgage Bankers Association said this week, and foreclosures on all types of home loans rose to a record. Yesterday, U.S.-based Bear Stearns Cos., the biggest underwriter of mortgage-backed bonds, said it's shopping for distressed debt, including subprime home loans that have soured.
`No Assurance'
Accredited, the 15th-biggest U.S. subprime lender, will take a pretax charge of $150 million on the sale of the loans. It is also exploring strategic options, including raising additional capital. The company won't file its annual report by today, and the loans will be sold ``over the next couple of days,'' it said.
Accredited also said changes are needed to the amount of goodwill established in its purchase of Aames Investment Corp. last year.
The company is continuing to seek waivers and extensions of waivers of financial and operating covenants. ``There can be no assurance that the company will be successful in receiving any of the required waivers,'' Accredited said.
Shares of U.S. mortgage companies rose yesterday after Blackstone Group LP agreed to buy PHH Corp.'s home-lending business and Bear Stearns said it may buy more subprime loans.
Countrywide Financial Corp., the biggest U.S. mortgage lender, gained 3.1 percent, Accredited added 56 percent and New Century Financial Corp. more than doubled.
Spillover
Shares of mortgage companies have been pummeled this year by a rise in late payments and lack of demand from investors who buy home loans. Accredited stock fell 65 percent on March 13, when the company said it needed to raise cash to buy back bad mortgages it sold to investment banks.
More than two dozen lenders have shut down or sought buyers since the start of 2006 as defaults in U.S. subprime markets have grown, according to Bloomberg data.
Subprime borrowers often obtain loans with higher interest than prime loans because they have little or no down payment, or flawed credit. In some cases, borrowers aren't required to provide proof of income and may have high levels of debt.
``If prices go down, we will have problems -- problems in the sense of spillover to other areas,'' Greenspan said in remarks to the Futures Industry Association meeting in Boca Raton, Florida yesterday. While he hasn't seen such spreading yet, ``I expect to.''
To contact the reporters for this story: Kevin Foley in Sydney at k.foley@bloomberg.net
Last Updated: March 16, 2007 03:57 EDT
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