After a summertime examination by the Office of Thrift Supervision, a lender in Colorado has grudgingly agreed to write down its mortgage securities portfolio by half a million dollars.
"We had a difference of opinion over the way we had amortized" the holdings, said Bill Marcoux, treasurer at $1.5 billion-asset First Colorado Bancorp.
The OTS felt the thrift, which has a mortgage portfolio of about $250 million, should accelerate its amortization schedule to better reconcile the bonds' cost with their face value, Mr. Marcoux said. The adjustment made the securities worth $500,000 less on paper and caused the thrift to restate second-quarter earnings. The charge was an accounting step that did not affect the company's working capital for the period, Mr. Marcoux said.
When examining a thrift's mortgage securities portfolio, the OTS is sensitive to possible credit and interest rate risk, an OTS official said. Policing the portfolios is a big task because thrifts are among the largest investors in residential mortgage securities, with $150 billion held as investments.
Not everyone is sorry the mortgage securities market tanked in 1994. Monterey Homes Corp. credits the event-and the market's subsequent recovery-for a $2.7 million windfall posted last week.
Monterey uncovered the money when reviewing mortgage securities that were acquired late last year through the purchase of Homeplex Investment Corp., an asset management firm.
"Our timing turned out to be very good," said Larry W. Seay, chief financial officer at Monterey, a Scottsdale, Ariz., luxury home building company.
Homeplex bought the securities in the late 1980s, joining scores of investors that expected to make a killing on the products, known as mortgage derivatives. Instead, abrupt interest rate shifts sparked steep writedowns of the derivatives in 1993 and 1994, and most investors eventually sold the products at a loss.
But Homeplex sat tight after the writedown, and the derivatives languished until Monterey began efforts to sell them this month. It turns out that a package Homeplex had valued at $400,000 was, because of the market's recovery and the seasoning of the loans, now worth $3.1 million. Monterey arranged their sale to several Wall Street investment banks, Mr. Seay said.
A management shift will install a new chief executive at Mego Mortgage Corp., a large originator and securitizer of highly leveraged residential loans.
The Atlanta company's board of directors last week voted that president Jeff S. Moore, 39, would take on the additional responsibilities. On Sept. 2 he will succeed Jerome J. Cohen, 69, who plans to stay on as chairman.
Mego was formed in 1992 and helped pioneer loans with 125% loan-to-value ratios and other highly leveraged mortgages.
Analysts are generally upbeat about the company and Mr. Moore's leadership abilities, although they point out that increased competition does challenge margins. The company originated $347 million of loans this year through July; the full-year total back in 1995 was just $88 million.
