Mortgage Lender Turns Profit After Portfolio Realignment

MFA Mortgage Investments Inc., a mortgage loan financing company, said Friday it swung to a fourth-quarter profit after modifying its loan portfolio to navigate through an increasingly tough market.

MFA Mortgage reported a net income of $4.4 million, or 6 cents per share, compared with a loss of $32.6 million, or 40 cents a share, in the fourth quarter of 2005.

Analysts polled by Thomson Financial forecast profit of 7 cents a share.

MFA Mortgage invests in bonds backed by pools of mortgage loans, earning money off the interest rates paid on the bonds. The company said those bonds weren’t very profitable earlier in the year.

They were expensive and didn’t pay a high interest rate.

In the fourth quarter of 2005, MFA Mortgage Investments recorded charges to exit some of its investments in unprofitable bonds.

Those charges resulted in a significant home loan revenue loss for that quarter.

In the fourth quarter of 2006, the home mortgage company earned around $9.4 million in interest income off the bonds, lower than the $10.3 million earned in the fourth quarter of 2005.

Now, the home loan-backed bond market is looking better, the company said, and it expects to earn profit off buying new bonds this year.

MFA expanded its mortgage-backed bond portfolio to $6.34 billion as of December 31, from $4.61 billion at the end of the third quarter.

For the year, MFA reported income of $598,000, or a penny per share, versus a loss of $1.5 million, or 2 cents per share, in the year-ago period.

SOURCE: Business Week