New Century Stops Accepting Loan Applications
March 9th, 2007HAHA! Right down the street from the Wall Street Chop Shop I worked for…
Via: Business Week:
Subprime lender New Century Financial Corp. said Thursday it has stopped accepting all new loan applications as it struggles to obtain financing amid market speculation that the company could file for bankruptcy.
In a Securities and Exchange Commission filing, New Century said it was only able to fund some of its loans this week, and its capacity to fund new loans has been “substantially limited” due to problems obtaining financing from lenders.
Aside from deteriorating credit quality, the nation’s second-largest subprime lender faces investor lawsuits and an investigation by federal prosecutors into trading in the company’s stock.
New Century said Thursday it is in “discussions with lenders and other third parties regarding a refinancing and other alternatives to obtain additional liquidity,” adding that “no assurance can be given that any of these discussions will be successful.”
One of the companys lenders extended $265 million in financing secured by New Century’s REIT mortgage loan portfolio and certain residual assets. Proceeds will be used to refinance or satisfy some of the companys existing obligations.
The unnamed lender also provided financing to refinance the rest of the company’s balance of $710 million in mortgage loans, which are currently financed through another lending facility.
A New Century director, David Einhorn, resigned from the company’s board Wednesday night. Einhorn is a principal at hedge fund Greenlight Capital LLC, which owns more than 6 percent of New Century’s stock.
The Irvine, Calif.-based company has become the poster child for the problems of the subprime mortgage industry, which lends money to people with bad credit. Amid a slowdown in housing markets nationwide, the subprime industry has come under the microscope in the past month.
Wowzer. I guess they won’t be having a pity party for Einhorn. Next thing you know, somebody like Newt Ginrich will be spouting somesuch: these dumb folk should have asked us if we thought they could ever pay back their loans before we lent to them.
p.S. I know a certain person in colorado who is probably covering the REIT spread. L.G.
Easy come.
Easy go.
‘Cept for all the cash spent between the come and go.
And in the end doesn’t this ultimately lead to a glut of foreclosed housing, thereby forcing the value of homes downward? I’m totally against these predatory lenders (citibank took a beating in a congressional hearing this week), but since we’re inundated with them now, doesn’t that mean that we’ll see a boom in used housing market as the bottom falls out?
Enjoy.