DALLAS - The homebuilder Centex Corp. said its home equity unit is abandoning the gain-on-sale accounting method for its subprime loan securitizations.From now on, Centex Home Equity Corp. will use the portfolio method, in which income from a loan is booked as it is collected. Under the gain-on-sale method, the company would estimate and book the profit from a loan when it was securitized.
Centex said the unit's subprime loans have been performing as well as expected, or better. But higher interest rates and the expectation that they will continue rising forced it to increase the discount rate used to value future cash flows from its securitizations. That resulted in a $16 million hit to Centex Home Equity's earnings in the fiscal fourth quarter, which ended March 31.