IMC Mortgage Co. joined a growing list of lenders whose strategy of short-selling Treasury securities to hedge the loans it holds for securitization backfired in the third quarter.
Because of the global financial crisis, "investors increased investments in United States Treasury securities and at the same time demanded wider spreads over Treasuries to acquire newly issued asset-backed securities," the company said Monday in its quarterly earnings report.
As a result, the hedge declined in value by $40 million during the quarter, and the company will recognize an additional $7.5 million loss for the fourth quarter.
The company earned $2.2 million in the third quarter-or 6 cents per diluted share-down 83% from a year earlier. Loan originations were flat at $1.9 billion.
IMC delivered $1.4 billion of loans into securitizations and about $525 million in whole-loan sales during the quarter.
The serviced loan portfolio Sept. 30 was about $10.1 billion, up from $5.6 billion a year earlier.
IMC is looking for a buyer and has obtained a $33 million, 90-day credit facility from Greenwich Street Partners II LP, the company said in its report.