Knight’s Reverse Mortgage Business Intact After $440M Trading Loss

In the wake of a $440 million trading loss sustained by Knight Capital Group (NYSE: KCG) this week, the company’s reverse mortgage unit, Urban Financial Group will continue operating and will maintain its presence as a Ginnie Mae HMBS issuer, the company said Thursday.

“Knight’s loss related to an equity trading technology issue August 1 did not impact Urban Financial’s capital base,” said spokeswoman Kara Fitzsimmons. “The ability to issue GNMA HMBS is established and Urban is in full compliance.”

Additionally, the company confirmed there would be no delay in funding of loans through any of Urban’s reverse mortgage channels including retail, wholesale or correspondent.


The loss took place as the result of a trading technology glitch which led the company to buy high and sell low. Losses to its stock price amounting to near 75% on Thursday let many analysts to question the company’s solvency, in spite of its making good with clients and customers.

Company Chairman Tom Joyce told Bloomberg News in a TV interview Thursday that the company was seeking financial support. No agreement had been made as of late Thursday.

Urban Financial is the largest reverse mortgage lender by volume as well as an active Ginnie Mae issuer.

Written by Elizabeth Ecker

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  • All of these financial ‘instruments’ are bad-memes that need to be purged from the system.  Corporations are disconnected from Gaia and will be expunged. 

  • Ever since Knight made this acquisition, I have been waiting for something like this to happen.

    Being public adds a predictable risk of nuclear incidents like this.

    I know where I am speaking from. I was a public CEO about ten years ago and had to go through something similar.  Ultimately, the incident killed the company.

    Make no mistake about it. This is a warning sign for Urban correspondents.

    Never accept the PR at face value.

    Just my very experienced and likely biased two cents.

  • One of the sub issues is the market’s tendency to believe perceived versus actual risk.

    That woud likely knock down any valuation right now; everyone is running scared. And NO ONE wants to deal with Cordray and all this CFPB BS.

    Maybe Hendershot could re-acquire? I’d like that. 

  • When you lose almost $.5 billion almost overnight, when you are “seeking financial support,” when your stock price drops almost 75 percent, it is not a good sign, even if the PR folks are putting a cheery spin on it. We need Knight and Urban in the reverse space. Let’s pray for them to find cash, quickly.

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