Posted on 03/13/2007 8:11:15 AM PDT by Flavius
TRADING has halted in New Century Financial, with the second-largest US sub-prime lender teetering on the edge of bankruptcy, sparking fresh fears about whether turmoil in the sector could spread and dampen US economic growth. The trading stoppage, ordered by the New York Stock Exchange, came after New Century said its banks had either cut off credit or signalled their intention to do so, increasing the likelihood of an imminent bankruptcy filing or asset liquidation. in default.
New Century also said lenders had demanded that it accelerate its obligation to buy back outstanding mortgage loans financed under the lending arrangements.
New Century said that if its bankers demanded accelerated repurchase of all outstanding mortgages it would cost the company $US8.4 billion, an amount it does not have.
That could lead the lenders to force a liquidation of New Century's mortgage portfolio.
New Century said such a liquidation might not generate enough capital to meet the banks' demands.
The rapid decline of New Century Financial has added a new sense of urgency to first-quarter earnings reports due this week from Wall Street investment banks Lehman Brothers, Bear Stearns and Goldman Sachs.
While first-quarter profits from all three are expected to be up from last year, analysts and investors will be listening intently for any comments from executives about the potential future impact on profits.
Additional reporting: Richard Beales and Eoin Callan in Washington
(Excerpt) Read more at theaustralian.news.com.au ...
well at least the home ownership is at an all time high
Not all subprime lending is "poor homeowners that are maxed out on credit and mortgages."
Many are decent-risk borrowers who fall just a little outside Fannie Mae and Freddie Mac guidelines but are still decent, good people with sufficient income and desire to repay.
The problem arose when these subprime lenders relaxed guidelines to the point that anyone who could fog a mirror got a loan.
New Century was a good lender for years - they never did the really high-risk loans that some lenders did - and what they DID do that was riskier they pulled out of before many others did.
Their main problem had to do more with bad management and fraud than poor lending decisions. Unlike most of the other subprime lenders having problems, New Century had above-average profitability and below-average defaults even recently.
thats cool
but my favorite story was from bus week
where a hud people where being offered 25k cash against their 0% hud homes
and they took it
then they lost their homes cause their mortgages went from 350/mo to 900/mo thanks to predatory tactics I am sure of these sub prime clown lenders
reminds me of savings and loans debacles but its good credit makes the world go around
I wonder if the Bear Stearns analyst who upgraded them on March 1 is getting his thirty pieces of silver as actual silver.
Those kind of things are totally different than just general subprime lending.
I read that story too. Not a good situation.
However, regardless of what kind of regulations are in place, SOME of that stuff will happen as there are dishonest people out there. Caveat emptor as they say.
Good credit is always better to have, but sometimes things do go wrong. You can detect a pattern. If someone's never paid a bill on time in 10 years, that's different than someone who had problems but for the last couple years has paid everything on time, but due to previous problems still has a lower credit score. The first person will have a MUCH higher chance of default than the second one.
Sometimes a little common sense is needed.
market is one big pyramid scheme and the analysts are Tupperware specialists ...
coincidently Goldmand Sach just had their best qtr1 ever, no doubt they dont hold any of these sub prime nightmares, but could have even knocked them down going short
would love to see what plays they have made to generate that cash flow, beats working for a living for sure
Dirty little secret here - much of these sub-prime loans are to illegal aliens. It's the elephant in the room nobody in Washington or at the Wall St Journal or Chamber of Commerce wants to admit because it would kill their amnesty plan.
If you think the Savings & Loan in the 80's was a mess, wait till you see the wreckage from this mess. Taxpayers picked up a $125 BILLION tab on that, and the sub-prime defaults may total $225 BILLION before it's over.
Sell your stocks now.
Buy houses next year - they will be real cheap.
What I love about the entire "sub-prime" fiasco is how many major financial companies who made investments in the "sub-prime" lenders did less due diligence on the financial soundness of those lenders than you or I would do looking at a mutual fund to invest in.
Now some of those major financial companies will soon be running to the politicians, trying to move the blame to anyone but themselves and obtain some kind of "relief" for the hole they dug for themselves.
Taxpayers, listen up!!! Ignore the idiots who put their money in the bloated sub-prime market, ignore the politicians that will come asking for your money to help them and know that if you were looking for a $500,000 house for $300,000, there are about to be many of them available.
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