COLUMBIA, S.C. -- Fleet Mortgage Group, stung in the first quarter by the high rate of loan prepayments, instituted a servicing hedge in the third quarter that produced a gain of $13.7 million.
But the gain was not enough to offset amortization costs for servicing rights. This charge amounted to $56 million.
The company said third-quarter earnings slipped to $24.9 million, from $29.4 million in the quarter a year earlier. In the second quarter, Fleet Mortgage reported a loss of $35.4 million, because of a $100 million revaluation of its servicing rights.
A spokesman said the servicing hedge was a long position in Treasury options, which increases in value as interest rates decline. This would tend to offset losses attributabe to mortgage prepayments.
The second-quarter loss put heavy pressure on the stock of Fleet Financial Group Inc., Providence, R.I., which owns 80% of the publicly traded Fleet Mortgage.
Fleet Financial was trading at midweek at about $16.25 a share, slightly above its low for the year of $15.50.
PERTH AMBOY, N.J. -- Margaretten Financial Corp., Perth Amboy, N.J., reported a loss of $19.1 million in the third quarter. A year earlier, the company earned $6.7 million.
Gets an Upgrade
It said the loss was largely attributable to previously announced charges related to heavy mortgage prepayments.
But Jonathan Gray, an analyst with Sanford C. Bernstein & Co., New York, upgraded the company's shares to |buy' because of the positive implications of a new accounting rule being drafted by the Financial Accounting Standards Board.
Margeretten also said it had initiated a shareholder rights plan that would be triggered in the event of a hostile takeover attempt.