Have we turned a corner on mortgage default rates? Minneapolis-based Dolan Media Co. (NYSE:DM) gave a resounding “No!” to that question when it issued its Q3 results Friday.
The company’s delinquent-mortgage processing business, which accounted for 57.7 percent of revenue in the quarter, grew 69.9 percent to $40 million from Q3 of last year. Total revenue increased 30.2 percent year over year to $62.3 million, and net income was $5.9 million or $0.20 per share, compared with $2.5 million or $0.09 per share in Q3 of last year.
Additional delinquent-mortgage processing business was pushed into future quarters, the company said, because of regulatory efforts to stretch out the mortgage default process.
“The net effect of … regulatory and mitigation efforts was a reduction of approximately $5.0 million in mortgage default processing services revenues… $3.3 million of which was a direct result of the new legislation in Michigan and Indiana,” the company said in its earnings release.
“All indicators point to these regulatory and loan mitigation efforts delaying foreclosures and lengthening the process but not substantially mitigating them,” the statement added. “The national backlog of seriously delinquent mortgages continues to grow faster than it is being bled away by foreclosure referrals and loan modification efforts … We continue to anticipate stronger growth in the future and for quite some time to come.”
That grim trend was echoed recently by the credit reporting company Equifax, which reported a record 7.65 percent of homeowners were at least 30 days late on mortgage payments in September, up from 7.58 percent the previous month. The rate of delinquencies is more than double the 3.55 percent rate in September 2007.
Dolan Media also announced Friday that it acquired an 85 percent stake in DiscoverReady LLC, of New York, which provides document review services for large corporations and lawyers involved in litigation or regulatory issues. Financial terms of the acquisition were not disclosed.
In addition to its business services offerings for the real estate and legal professions, Dolan Media publishes specialty business and professional journals and websites that include Finance and Commerce, Minnesota Lawyer and Politics in Minnesota.
On a day when the broader markets were all in positive territory, Dolan Media shares fell $1.53, or 12 percent, to close regular trading at $11.25. The stock gained some of that back, rising 55 cents, to $11.80 in extended trading late Friday.