Subprime home-equity lender American Business Financial Services last week announced that it would postpone its third quarter filing with the Securities and Exchange Commission until the end of the month. A recent 8-K from the company states that it "does not anticipate any unusual announcements related to quarter or fiscal year results."
ABFI indicated in July that it would report a $20 million to $30 million loss attributed to its inability to securitize through its typical channels. The company most recently tapped the market in March, with a $387 million deal via Bear Stearns. ABFI has indicated that it plans to use the whole loan market for an exit strategy, hoping to off lay $700 million. It is not yet clear how successful the company has been in selling whole loans. In mid July, wire services reported that ABFI had closed on $125 million in sales.
This year, ABFI has been the target of both regulators and mainstream media outlets, including CBS MarketWatch, which criticized ABFI's retail borrowing program in March and advised retail investors to steer clear. Here, the firm sells investment notes to consumers in $1,000 denominations, which resemble, on the surface, brokered cash deposits, though, unlike cash deposits, they are not federally insured. In the company's retort to CBS (which CBS printed in full), ABFI indicated that its portfolio of investment notes is roughly $700 million.
More recently, the firm (along with other subprime lenders) has had its lending practices investigated by regulators, specifically the Civil Division of the United States Attorney for the Eastern District of Pennsylvania, which issued a civil subpoena in May. According to home-equity analysts, the investigation is associated with ABFI's serving practices. ABFI often uses a "deed in lieu" agreement with its borrowers, which facilitates a foreclosure and seizure should the borrower fall out of schedule.