Mortgage Holding Firm Will Restate, Is Downgraded

Mortgage banker Doral Financials' stock price is swooning as an earnings restatement is announced. "It will restate earnings for recent past quarters after deciding it improperly calculated the value of floating rate interest only strips. The company said the restatement will result in a decrease in the fair value of the securities by $400 to $600 million."

After the market closed, Fitch Ratings downgraded Doral. "While Fitch has and continues to recognize the volatility associated with the [interest-only] asset, the source of the valuation change was unexpected and raises concern with other accounting and valuation practices employed by Doral."