In the wake of a pricey lawsuit with the state of New York, Delta Funding Corp. has decided not to launch its scheduled third-quarter securitization, and instead is gearing up to issue bonds in the fourth quarter, officials at the company said.
That decision comes as Delta last week settled with Attorney General Eliot Spitzer over allegations of questionable lending practices. With that matter settled, Delta plans to issue heavily at the start of the fourth quarter, combining what was to price in the third quarter with the company's $400 million to $450 million expected fourth-quarter volume.
"We're all very excited it's over," said Delta President and Chief Executive Hugh Miller. "It give us a clean slate to move forward with."
In June, Delta agreed to settle with Spitzer for $6 million. However the settlement never went through, and instead Delta settled with the New York State Banking Department for $12 million. That triggered Spitzer to refile the lawsuit, confusing the issue. Yet early last week, Spitzer decided to join the banking department pact, ending what has been an ongoing debacle for Delta.
Roughly $7.2 million of the settlement is costs Delta will incur by lowering monthly payments to some of its borrowers. The remaining approximately $4.75 million is Delta common stock that will be used to fund public service programs including consumer education and counseling.
"While Delta's always been a leader in consumer protection, we're now the leader, and were very proud of it," said Miller.
Late last week, Moody's Investors Service announced it will place all of Delta's uninsured subprime home equity deals under review for possible downgrades.
In related news, the Federal Deposit Insurance Corp. said it plans to issue guidelines for subprime mortgage lending. The announcement follows two bank failures earlier this month. Both First National Bank of Keystone and Peoples National Bank of Commerce were closed for "questionable practices," including aggressive lending, The FDIC said.
According to an official at the FDIC, the time-line for when the regulations will be developed and implemented is currently undetermined.