Delta Funding Corp. says it expects to come to market with two quarters worth of securities in October now that the New York Attorney General has endorsed a $12 million settlement of abusive-lending claims against the Woodbury, N.Y., specialty lender.
In settling claims that it lent at excessive interest rates, Delta -- without admitting any wrongdoing -- agreed to take a $7.25 million reduction in loan payments and to set aside $4.75 million of its stock for restitution to customers and to finance consumer education.
On Friday the attorney general went along with the New York Banking Department and the U.S. Justice Department in agreeing to the settlement, provided that a third-party monitor -- appointed by the attorney general and the banking department -- periodically sample Delta's loans to make sure they comply with the agreement.
The settlement clears the way for Delta to resume its business. While the lawsuits were unresolved, it says, it has been unable this quarter to complete securitizations, for the first time since its initial public offering in 1996.
"For us to complete a securitization, we'd have to do it in the next seven to eight business days," said Hugh Miller, president and chief executive officer. "In that time frame, we want to get out there and talk to the asset-backed investors and address head-on any concerns."
For now, he said, a securitization would be too costly, because Moody's Investors Service, citing publicity about the lawsuits, has put $528 million of Delta's outstanding securities on credit watch.
"Quite frankly, we wanted to get the Moody's credit watch lifted" before proceeding with a deal, Mr. Miller said. "Can we do a deal with that on? Sure we can. But you and I both can guess as to exactly what our pricing would be if we did deal with a credit watch on."