Delta Financial Corporation (NASDAQ:DFC)
Industry: Financial
Delta Financial Corporation, incorporated in 1996, is a national specialty consumer finance company that originates, securitizes and sells (and, prior to May 2001, serviced) non-conforming mortgage loans. The Company's loans primarily are secured by first mortgages on one- to four-family residential properties. It has focused on lending to individuals who generally do not satisfy the credit, documentation or other underwriting standards set by more traditional sources of mortgage credit, including those entities that make loans in compliance with the conforming lending guidelines of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). The Company makes mortgage loans to these borrowers for purposes, such as debt consolidation, refinancing, education and home improvements. As of December 31, 2005, Delta Financial Corporation had three wholly owned direct subsidiaries: Fidelity Mortgage Inc., DFC Financial Corporation and Delta Funding Corporation. Fidelity Mortgage Inc. originates mortgage loans directly with borrowers, who submit loan applications. It develops loan leads primarily through a telemarketing system, and also through Internet leads, direct mail and a network of 12 origination centers located in 10 states. In 2006, the business operations of Fidelity Mortgage Inc. were transferred to Fidelity Mortgage, a division of Delta Funding Corporation (except for one state's operations which are expected to be transferred upon receipt of state approval). Additionally, the Company closed one of its origination centers located in Cincinnati, Ohio, in February 2006. DFC Financial Corporation holds certain trademark rights for both Fidelity Mortgage Inc. and Delta Funding Corporation. Delta Funding Corporation originates mortgage loans indirectly through independent mortgage brokers and other real estate professionals, who submit loan applications on behalf of borrowers. The majority of the originations occur in 34 states, through a network of approximately 3,000 independent brokers. Additionally, Delta Funding Corporation has 15 wholly owned direct and indirect subsidiaries. The Company provides its customers with a range of loan products designed to meet their needs, using a risk-based pricing strategy to develop products for different risk categories. Historically, the majority of the Company's loan production has been fixed-rate with amortization schedules ranging from five years to 30 years. During the year ended December 31, 2005, the average loan size was approximately $154,000 and, at the time of origination, the weighted average interest rate was 8%; the weighted average combined loan-to-value (CLTV) ratio was 78.8%, and the weighted average credit score of the underlying borrowers was approximately 628. At least 37% of the annual loan production has been related to borrowers located in New York, New Jersey or Pennsylvania. The Company makes mortgage loans to individual borrowers, which are a cash outlay for Delta Financial. At the time the Company originates a loan, and prior to the time it securitizes or sells the loan, the Company either finance the loan by borrowing under its warehouse lines of credit or utilizing available working capital. Since the year ended December 31, 2004, the Company has structured its securitizations to be accounted for as on balance sheet financings, in which it records interest income on the outstanding portfolio of loans in each securitization trust and interest expense from the pass-through securities issued by each securitization trust over time. When the Company sells loans on a whole-loan basis, it records the premiums received upon sale as revenue, net of any premium recapture reserves. The Company originates mortgage loans through two distribution channels, wholesale and retail. In the wholesale channel, it receives loan applications from independent third-party mortgage brokers, who submit applications on a borrower's behalf. In the retail channel, the Company receives loan applications directly from borr
As Of: 10/07 00:00 ET
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