The damage from the US subprime crisis spread on Tuesday as Accredited Home Lenders and Impac Mortgage Holdings said the future of their lending operations looked bleak.
The announcements came a day after another troubled mortgage lender, NovaStar Financial, said it would give up its real estate investment trust status because it could not pay a $157m dividend necessary to keep it.
Accredited posted a $250m quarterly loss, after reporting a profit last year, and told investors it could not offer any assurances it would survive.
“We face significant challenges due to adverse conditions in the non-prime mortgage industry, and we cannot assure you that we will continue to operate as a going concern,” the company said in a filing with the Securities and Exchange Commission.
The company said its survival would depend on income from mortgage servicing, the residual portions of loans it had securitised and home lending in Canada.
“There can be no assurance that these sources of income will be sufficient to fund our downsized operations pending the return of market conditions under which mortgage loans can be originated and sold or securitised at a profit,’’ the company said in the filing. Accredited had been unable to profitably sell or securitise most of the home loans made this year, it added.
This month, Accredited shuttered most of its lending operations and slashed its workforce from 2,600 to 1,000. It has closed 60 branches, five offices supporting lending to individuals and five wholesale divisions.
Accredited is suing Lone Star Funds, a private equity firm, seeking to reinstate a $400m buy-out bid agreed last June. Lone Star tried to back out of that deal after market conditions deteriorated, and last month offered a reduced $225m bid. The suit starts on September 26.
Impac said it would stop making Alt-A loans, which are a tier above subprime mortgages.