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Record Production Expected to Continue at Accredited

$2.4 billion 1st quarter production

May 3, 2004


Accredited Home Lenders Holding Co. started the year with the highest quarterly mortgage loan volume in its 14-year history and sees continued growth over the year. The company also will reconsider becoming a REIT in 2005.

The subprime lender announced it originated $2.4 billion in mortgage loans during the first quarter, up slightly from the previous quarter's record of $2.37 billion and a whopping 63% above the total in the first quarter 2003.

"We were particularly pleased with setting a new record for originations during the first quarter," company CEO Jim Konrath said in a conference call Thursday. He noted that although Accredited experienced an expected seasonal slowdown in volume during January and February, it closed more than $1 billion in new loans during March, setting both new monthly and quarterly records for the company.

The San Diego, Calif.-based lender attributed the increased levels of production to its expansion efforts; during the first quarter alone it said it opened 15 new franchises and added 610 primarily sales and sales support employees to its staff.

Asked whether the company forecasts greater loan origination volumes through the remaining quarter's of the year, Konrath told MortgageDaily.com that the first quarter has traditionally been the slowest quarter for the industry and for Accredited, and unless "totally unforeseen circumstances in the marketplace" arise, "we certainly believe that will be the case this year as well."

Accredited president Joe Lydon said another factor that will contribute to volume growth is that they plan to continue to increase the size of its employee base in the markets they have not fully concentrated in, but have high business potential.

While interest rates are likely to rise throughout the year, a company executive pointed out its portfolio of loans, on a monthly basis, is made up about 52% cashout refinance bill consolidation loans and another 38% are purchase money loans. "Therefore summing it up, we believe that 90% of the borrowers we do business with will be there" because they are not "not out shopping just for an interest rate play."

Wholesale originations represented 90% of the total production, while retail accounted for 10%, the nonprime lender reported.

Accredited said the size of the servicing portfolio of $4.3 billion grew 17% from the fourth quarter, mainly due to an increase in the loans held for sale and securitized loan inventory.

Delinquent loans -- 30 or more days past due including foreclosures and real estate owned -- were 1.4% of the serviced portfolio, decreasing from 1.8% in the previous quarter and from 2.5% a year earlier. Accredited noted that the improvement was due to the recent increase in the servicing portfolio and a combination of rigorous credit standards and prudent collection practices.

The weighted average FICO score in the portfolio of loans in the first quarter was 634, according to the report.

Following similar moves by other subprime lenders such as Saxon Capital and Aames Financial Corp., Accredited executive Ray McKewon said the company had considered a conversion to a REIT this year. However, based on an extensive research and review process with experts, the conversion would add significant administrative complexity. The company has received divergent advice on how a hybrid REIT could or should be structured and how the options would be valued over time, "which resulted in a wide range of potential results for its stockholders and no small amount of uncertainty.

"We want to be clear though, we have neither rejected nor embraced the idea of becoming a REIT in the long-term, in fact we intend to reconsider this option in 2005," added McKewon.

Net income for the first quarter was reported at $22.5 million.

Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

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