Exactly one year ago, it looked like it was lights out for Xceed Mortgage Corp . After posting a $17.6-million loss for fiscal 2010, the company shut the taps on new residential mortgage applications.
Then came Thursday's news that Xceed is back into underwriting mortgages, made clear in its fiscal 2011 year-end results. Operating with a work force half the size of what it was last year, the company has chosen to come back and operate in a much stricter environment.
Though Xceed thrived when mortgage rules were incredibly lax, the federal government has since cracked down on amortization periods, maxing them out at 30 years for borrowers who put less than 20 per cent down. Moreover, the maximum amount that homeowners can borrow when they refinance has dropped to 85 per cent of the value of their house, down from 90 per cent.
It turns out that seven months after Xceed made its drastic announcement, management felt confident enough to start getting back in the game. After re-organizing sales and underwriting teams and putting together new insured products, management decided the firm could start offering brokered mortgages again in the fourth quarter, albeit on a "limited scale."
Before turning the taps back on, Xceed focused on three main things: offering mortgage holders whose loans were in an ABCP conduit attractive renewal terms in order to prevent defaults; managing its legacy portfolio; and examining future lines of business that could help the company come back.
One of these business lines is something you typically wouldn't associate Xceed with: conventional prime mortgages. The company re-launched this product on Thursday, offering loans to new or existing homeowners with loan-to-values of 75 per cent of lower.
During the fiscal 2011 year, Xceed posted a loss of $1.3-million. Much of that stems from a $1.7-million before tax settlement to end a law suit with HSBC Financial Corp. Because mortgage origination was shut down for most of the year, the value of new mortgages in 2011 fell to $75.6-million, down from $403-million in 2010. Yet the company lost much less money.
No one is saying that Xceed's comeback is successful. But the mere fact that the company is still kicking is surely a surprise to many.