NEW YORK (Reuters) - Subprime mortgage lender Delta Financial Corp DFC.O said on Thursday it plans to file soon for bankruptcy protection, after losses mounted and an agreement to obtain new financing fell apart.
The Woodbury, New York, company also said it will stop taking mortgage applications, and it does not believe it can continue as a going concern.
Delta would join more than a dozen other U.S. mortgage lenders to go bankrupt this year amid the U.S. housing downturn. Among these is another Long Island-based lender, American Home Mortgage Investment Corp AHMIQ.PK, of Melville, New York.
In a statement, Delta said its warehouse lenders have notified it of events of default under its financing agreements, after the company was unable to sell some loans.
As a result, Delta said it expects to abandon plans to raise $100 million by selling senior notes and common stock to an affiliate of Angelo, Gordon & Co, one of its largest shareholders. Angelo Gordon would have taken a majority stake.
Founded in 1982, Delta made loans through its own retail offices and a network of about 3,200 independent brokers. It said it made $3.4 billion of mortgage loans from January to September, of which 95.8 percent carried fixed rates.
Delta said it lost $39.6 million in the third quarter, as it lost money on loans it sold, while credit losses tripled. It fired a majority of its 1,395 employees this year.
The company did not immediately return a request for further comment. Subprime loans go to borrowers with poor credit.
Delta’s largest shareholder is Pabrai Investment Funds, which owns a 28-percent stake, according to Thomson ShareWatch.
The Irvine, California firm’s principal, Mohnish Pabrai, is a value investor and disciple of billionaire Warren Buffett. Pabrai declined on Thursday to comment on Delta.
American Home had specialized in “Alt-A” loans, which go to people with good credit but who often cannot document income or assets. It filed for Chapter 11 protection on August 6.
Delta shares plunged 82 percent, or $1.40, to 30 cents in afternoon trading on the Nasdaq.
Reporting by Jonathan Stempel; Editing by Dave Zimmerman and Maureen Bavdek