Action Finance ends operations
By MortgageDaily.com staff
1/10/2005

While a recently deteriorating second mortgage portfolio reversed a string of profitable years for one Midwest finance company, it was the lack of potential growth in the market that led the parent company to close the unit down.

Action Finance Co. has closed its five retail-lending offices in southern Ohio and sold a $9.2 million loan portfolio, according to an announcement from parent company Oak Hill Financial Inc.

Following the yearend transaction, the Ohio company became defunct.

Action's portfolio, which reportedly deteriorated considerably over the past year, consisted of small consumer and second mortgage loans with poor credit quality. While Action, founded in 1998, had turned profit every year from 1999 to 2003, it had an operating loss for 2004, Oak Hill chief executive R.E. Coffman Jr. explained in the statement. Charge-offs were running about twice their historical rate over the past several months.

"In our region, the market for traditional finance company loans has changed dramatically over the past few years," Coffman said. "As a result, we no longer saw a cost-effective path for growth at Action Finance, and we felt that our efforts and resources were better directed toward our bank and insurance subsidiaries."

The closure comes even as the nonconforming mortgage market in general is thriving -- with subprime, Alt-A and home equity lending all rising since 2003s refinance meltdown.

Oak Hill expects to take a one-time after-tax charge of $2.3 million pursuant to the sale and cessation of the operations.

"In the final analysis, the key to our decision was simply the lack of long-term asset and earnings growth potential in the consumer finance business."

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