Financial services company National City said it hasn't been able to sell some $1.6 billion in nonconforming loans amid a downturn in the market for mortgage loans made to borrowers who don't qualify for conventional loans.
The company has written down the fair value of those loans by $11 million through February and said further write-downs are likely.
National City -- which provides banking, mortgage financing and asset management services -- said the nonconforming loans, part of its First Franklin business, were held for sale but 'are currently not saleable at what management considers an acceptable price due to adverse market conditions.'
Nonconforming loans are made to borrowers who don't qualify for conventional mortgages. Lenders sell these loans to banks and other institutions who use them as collateral behind mortgage-backed bonds. Investors have soured on riskier mortgages as payment defaults among borrowers have risen sharply.
National City said it plans to retain the loans, and they will be transferred back into the portfolio in March.
San Jose, Calif.-based First Franklin sells first- and second-lien residential mortgage loans and home equity lines of credit.