Accredited Home Lenders reacts to market conditions by closing offices, reducing staff

By Lisa Kerner

Charlotte, N.C., Aug. 22 - Accredited Home Lenders Holding Co., for the second time in two days, announced it was taking steps to restructure parts of its business in the wake of "ongoing turmoil in the non-prime mortgage industry."

On Wednesday Accredited said it will implement the following changes to its loan origination and settlement services platforms:

• Close 60 retail branch locations and five centralized retail support locations as of Sept. 5, or substantially all of the company's retail lending business;

• Close five of the company's 10 wholesale divisions as of Sept. 5;

• Reduce wholesale workforce by 490 positions as a result of the closings;

• Stop accepting new U.S. loan applications effective immediately;

• Reduce the settlement and insurance services division, Inzura Settlement Services; and

• Reduce staff at the headquarters office to 220 from 400 employees.

"These difficult decisions were made out of necessity in light of the continued and widely publicized turbulence in the mortgage and financial markets, but with a heavy heart," chairman and chief executive officer James A. Konrath said in a company news release.

"Many of the people who are affected by these decisions have been productive, dedicated and loyal colleagues for many years."

Accredited's Canadian operations and servicing platform for its loan portfolio of $8.4 billion will be affected by the restructuring. The company also expects to maintain its three existing warehouse credit facilities with a total capacity of $1.6 billion for U.S. loan originations and $150 million Canadian for Canada loan originations.

"Accredited's delinquency and loss numbers have historically been among the best in the industry," Konrath noted in the press release.

"Even though our servicing ratings have been downgraded over liquidity concerns in recent months, we intend to maintain the quality of our servicing operations and expect to continue providing the highest level of loan servicing for our bond investors."

On Aug. 21 Accredited agreed to trade about $1 billion of loans under a 90-day purchase agreement with an unnamed investor at an advance rate comparable to what the company currently receives from warehouse lenders.

The company settled an initial pool of $500 million on Aug. 17. The remaining loans will trade every other week with the final sale of the loans expected to occur by October.

The agreement allows Accredited to repurchase all of the loans traded through mid-November at a premium to the advance rate. Accredited's call right expires if the company does not repurchase the loans by mid-November and the investor will keep the loans.

While the transaction will not impact Accredited's liquidity, it will reduce the San Diego mortgage company's exposure to margin calls.

A small holdback reserve in included in the agreement, allowing the purchaser to reject loans that do not meet certain criteria.

About $600 million of Accredited's loans are not covered by the agreement, funded instead by warehouse credit facilities and cash.

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