Downey Financial Restates Non-Performing Assets

From an 8-K filed Monday by Downey Financial (DSL).

"As required for all loans classified as troubled debt restructurings, loans modified as part of our borrower retention program must now be placed on non-accrual status but interest income will be recognized when paid. If borrowers perform pursuant to the modified loan terms for six months, the loans will be placed back on accrual status and, while still reported as troubled debt restructurings, they will no longer be classified as non-performing assets because the borrower has demonstrated an ability to perform..."

More detail at Calculated Risk.

For me, the most interesting thing is not the effect of this restatement, but simply the continued, sharp increase in plain-vanilla non-performing assets (NPAs) from November to December.

Of course, I had a pretty good indication of that last week, thanks to my tri-county survey.

Here's a restated chart showing NPAs before and after the change.

Here's the kicker: "As yet, we have not determined the impact this reporting change may have on previously reported financial statements, if any, but we expect to complete this analysis soon.”

Comments

[kurt walter:]

DSL has too many pay option arm loan in the portfolio. That was their main loan type. How did so many unqualified people get into real estate? With a pay option arm loan. That game is over.

2008 Jan 15 12:39 PM

[Alex S. Gabor:]

Downy actually is insolvent and has a negative net worth just like Country Wide did. Google my article on WAMU and Downey I wrote in April of 2007.

If you had shorted a million shares of each stock in each company beginning last april you would be more than 100 million richer today.

George Soros, Bill Gates and Warren Buffet, are you guys paying any attention to me yet at all or do I need to send an army to wake you guys up?

2008 Jan 16 04:34 AM