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FirstFed sees a surge in lending

The L.A.-based thrift, which has tightened standards, made 30% more loans in July than in June. Its shares jump.

August 21, 2008|E. Scott Reckard | Times Staff Writer

FirstFed Financial Corp. on Wednesday reported what its chief executive called encouraging data from its mortgage portfolio, and the Los Angeles-based lender's battered stock jumped 30%.

In a monthly operational update filed with the Securities and Exchange Commission, the parent of First Federal Bank of California said it made 30% more loans in July than in June, and 166% more than in July 2007.

That's significant because the mortgages the thrift now is originating -- mostly with five years of fixed payments before the rate becomes adjustable -- are fully documented loans to California residents who have to prove they can afford the payments.

It's a contrast to the loans that got FirstFed and other California thrifts in trouble: adjustable-rate mortgages that didn't require borrowers to document their incomes and allowed them to pay so little that their loan balances went up.

As FirstFed reshapes itself into a more traditional lender, it's slowly working off some of the hangover from the era of credit excess. The firm's ratio of nonperforming to total assets, a key measure of dud loans, was 7.56% on July 31. That's up from 1.01% a year earlier and extraordinarily high. But it was down noticeably from the 8.2% recorded at the end of June.

Single-family loans delinquent by 60 to 89 days rose from $81.4 million to $101.4 million in the month. But newer delinquencies -- mortgages 30 to 59 days late -- edged down from $126.3 million to $123.4 million. And non-accrual single-family loans (mortgages on which payment has stopped) totaled $437.2 million, down 11% from $491.7 million a month earlier.

FirstFed CEO Babette E. Heimbuch called the July results encouraging but added in an e-mail that there was no guarantee the improvement would continue.

As FirstFed's problems with its old easy-money loans go down, its stock is going up, along with the number of more rational loans the lender is writing. "Short sellers" who had bet on the company's demise have been pulling back on those trades and may have done so again Wednesday by buying the stock to close out previous sales of borrowed shares.

The stock surged $2.76 to $11.86 on Wednesday. The shares are up from a low of $3.99 on July 14 but remain down 67% in the last year.


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