Secondary marketing losses and price competition combined to slash earnings at North American Mortgage Co. by 99% in the second quarter.
The Santa Rosa, Calif., mortgage bank earned $128,000 in the quarter, or 1 cent a share, down from $13.1 million, or 88 cents a share, in the period last year.
The main cause of the poor quarter was a decrease in loan origination fees of more than $11 million as well as a $6,8 million loss on sales of loans into the secondary market,
As the loan originalion market has shrunk this year, lenders have resorted to price cutting to bring business in the door.
Higher Rates Hurt
When taking loans into the secondary market, lenders have been saddled with loses caused by rising interest rates.
North American Mortgage also reported $2.7 million of nonrecurring expenses, including $1.5 million associated with staff reduction and a $1.25 million reserve for losses caused by the Northridge earthquake.
North American was able to record a profit for the quarter by stepping up the sale of servicing rights.
In the second quarter, the company sold $34.3 million of servicing rights, up from $21.7 million in the same quarter in 1993.