Delta Financial Corp. took a $15.7 million charge to earnings last week, making it the latest and perhaps one of the last subprime lenders to take a hit for rising prepayment speeds.

The company reported a second-quarter loss of $4.9 million, or 32 cents a share, against net income of $7.2 million, or 47 cents a share, a year earlier.

Nonconforming-mortgage lenders, which securitize loan pools and record earnings based on expected performance, must predict how many loans will be refinanced in a given pool.

Most subprime lenders have taken a charge in 1998 as loans were refinanced faster than expected.

Interest rates have hurt companies in the sector, said Delta's chief executive Hugh Miller. "We're taking what we believe will be a one-time charge."

Delta has increased its peak prepayment rates for fixed-rate loans to 31%, from 24%, and to 50% for adjustable-rate mortgages, from 28%.

"Hopefully, this will restore investors' confidence," Mr. Miller said. Delta closed Friday at tk, down tk% from Wednesday's close.

The company is unlikely to put itself on the block, as lenders Green Tree Financial Corp., Money Store, and United Companies have done, Mr. Miller said.

"We can still get funds at the same rates we have been," he said. "We don't have any liquidity issues."

Newer loan pools are not seeing the same spike in prepayments, Mr. Miller said. "The overall actual life-to-date prepayment speeds on our 1997 and 1998 deals of 17.8% and 8.4%, respectively, are running near or below our assumptions prior to the adjustments' being made."

Originations in the second quarter rose to $450 million, up 70% from a year earlier, while the servicing portfolio increased 83%, to $2.4 billion. The company also securitized a $445 million loan pool during the quarter, its largest ever.

Loans delinquent 30 to 59 days increased to 4.73% of the servicing portfolio as of June 30, from 4.23% as of March 31. Loans delinquent 60 days or more inched up to 2.69%, from 2.67%.

The company plans to keep adding volume in the Northeast and Atlantic states while entering markets west of the Mississippi.

Delta is transforming itself into a "cash-flow-positive" lender, Mr. Miller said. Companies that securitize are generally cash-flow-negative, because they don't reap profits from loans immediately.

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