Finova Realty Capital Drops a Market

Finova Realty Capital Inc. in Irvine said Thursday that fierce competition for borrowers has forced it to abandon its commercial mortgage securities business.

In such a business, lenders make loans on commercial real estate, package them into securities and sell them to investors, making money from the difference between what they charge borrowers and what they get from investors.

The market, however, has contracted, Finova said in a press release.

Its parent company, Finova Group Inc. in Scottsdale, Ariz., took a charge of $80 million in the last quarter, most of it because of a bad loan. Its shares have fallen 63% so far this year, closing Thursday unchanged at $13 a share. Last June, the company closed four of its offices and laid off 40 people.

The company said the unit will now focus on so-called bridge and mezzanine lending, which will be kept on its balance sheet instead of sold to investors. This will make its financial results more “predictable by eliminating the company’s exposure to the volatile CMBS markets,” the company said.