Hammond Co. reported a net loss of $532,673 for its fiscal first quarter ended June 30, contrasted with net income of $112,433 for the comparable period a year earlier.
The Newport Beach-based mortgage banker attributed the downturn to its decision to retain servicing rights on all the loans made in the quarter. By servicing a loan--collecting monthly payments and passing them on to the mortgage holder--a mortgage banker collects a small monthly fee. Hammond, however, has found it more profitable to sell the servicing rights when it sells the mortgages to institutional investors.
The company decided to hang onto servicing rights for most of its first quarter when the two principal government-sponsored mortgage insurance agencies disrupted the mortgage industry by suspended operations because of budget cutbacks.
Revenue for Hammond's fiscal first quarter totaled $5.3 million, up 12.8% from $4.7 million.
Reflecting the rapid pace of house sales and refinancing, the company made $93.5 million in loans during the quarter, a 59% increase from the fiscal first quarter a year earlier.
For its fiscal second quarter, Hammond said it expects to sell the servicing rights for loans made during the first quarter and thus regain its loss. "We expect a very strong second quarter," said Thomas Hammond, president of the company.