Huntington reports $300M loss from mortgage business

COLUMBUS (AP) — Huntington Bancshares Inc. said Friday it will take up to a $300 million charge in the fourth quarter stemming from a mortgage-backed investment, becoming the latest bank to report losses from the troubled mortgage industry.

The news sent the regional bank holding company’s stock down 7 percent to a multiyear low.

Huntington said it will take an after-tax charge of 81 cents a share to bolster its loan loss provisions in the quarter for loans Huntington makes to Franklin Credit Management Corp., which makes subprime and other residential loans.

Huntington acquired the relationship with Franklin when it bought Sky Financial Group this year in a stock and cash deal worth $3.6 billion. Sky Financial had made loans to Franklin for 17 years that Franklin used to finance mortgages.

New York-based Franklin said Thursday that it is delaying filing its third-quarter report and suspending the acquisition and origination of new loans because of the rapidly deteriorating real estate and mortgage origination credit market. It also said it was reviewing its reserve to cover losses and expects a substantial increase in the provision for loan losses in the quarter.

Hunginton said its loans to Franklin totaled $1.5 billion as of Sept. 30.

“Franklin’s mortgages represent the underlying collateral for our loans to Franklin,” Thomas E. Hoaglin, chairman and chief executive, said in a statement. “As a result of this new information, we needed to reassess the collectibility of the Franklin loans.”

Huntington said it has stopped making loans to Franklin and that the charge fully addresses the Franklin exposure.