Magazine article American Banker

OTS Spurs Writedown of Mortgage-Backeds

Magazine article American Banker

OTS Spurs Writedown of Mortgage-Backeds

Article excerpt

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. …

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