Subprime lender Mego Mortgage Corp. said Tuesday it would take a $20.2 million net loss for the six months ended Feb. 2.
The company said it was taking a writedown to cover readjustments of the values of its securities, which are experiencing higher-than-expected prepayment rates. The company is also readjusting its prepayment assumptions going forward because of increased prepayment rates during the three months ended Nov. 30.
This would be the second earnings writedown that Mego has taken because of rising prepayment rates.
Stockholder's equity at Feb. 28 was $40.4 million, down 24% from Aug. 31. The company's share price fell only 5.6% on the news, which was expected, and closed at $2.25.