Posted on 04/03/2007 10:08:24 AM PDT by BurbankKarl
The end came as no surprise, but it was still a shock for laid-off workers at New Century Financial Corp. when the Irvine-based subprime lender filed for bankruptcy protection Monday.
"This is like the Titanic sinking," said Erica Olsen of La Palma, a unit manager at Home123 Corp., New Century's retail lending arm. "We never thought New Century was going to sink and it is."
She was among the 3,200 New Century workers – 500 in Orange County – who lost their jobs Monday. New Century still employs about 1,000 workers in Orange County.
At Home123, work all but ground to a halt three weeks ago, after New Century's Wall Street creditors cut off funding. Employees said they sat at their desks from 10 a.m. to 3 p.m. – except during leisurely lunch hours – sometimes entertaining themselves by watching videos like "Babel" or "The Departed."
During that period signs of hope mixed with portends of doom. One day, rumors swirled that a big lender had agreed to bail out New Century. Another day, in an omen that New Century might not be paying its bills, a contractor collected all the ink cartridges from the office printers.
Employees suspected the end was near when they were advised of Monday morning's conference call.
(Excerpt) Read more at ocregister.com ...
bubble? What bubble?
I heard a lot of places in Irvine are in trouble. The Porsche dealer, the restaurants, the phone stores, the Best Buy.
I wonder - if you had a sub-prime mortgage that goes belly up, but you were making all your payments, what happens?
And yet you can still see commercials on TV right now, from places like Ditec.com, advertizing how easy it is to borrow 125% of your home’s value...
Of course, none of this makes any sense to an American Public, who still thinks it’s a great financial deal to hand the IRS a bunch of extra money all year long, interest free, just so they can have a big “refund” every Spring...
The good ones would probably be bought out by another lender early.
These mortgages are usually sold in bulk to investors....but if you recently took one out, that is a good question.
I am sure that is what the remaining employees are doing....
I wonder - if you had a sub-prime mortgage that goes belly up, but you were making all your payments, what happens?
Depends on your locality...
Let’s do a little thought exercise, shall we??
Your City has had the authority for some time to issue General Obligation Bonds, secured by the stated values of the local Real Estate Market in town, and the Tax Revenues and Levy Fees that are expected to come in over the coming decade from all of those properties. Let’s say that your City Council has stated to the Lenders, that they expect to reap Tax Revenues based on $500 Million Dollars worth of local Residential Houses that exist right now, and are expected to be built in the same time period.
Several different banks issue Bonds to the City, up to the maximum level the City is allowed to borrow, so the City can finance all of the different Projects that they have in the hopper.
Then two years later, after an Audit by the State, you find out that the City overstated the value of the houses they used to secure those Bonds by half. Instead of having $500 Million Dollars worth of security and income from tax revenues, the Housing Market corrections due to foreclosures and defaults is short by some 40% of what is needed just to pay the interest on those Bonds.
So now the City is looking at an Emergency Levy that requires even higher taxes on Residential Real Estate, in order to keep the City itself from declaring bankruptcy.
What we hear far too little about is how the Cities, Counties, and States have not only enabled the sub-prime real estate market to flourish, they looked the other way while these companies loaned money to people who had no business borrowing that much money, because those huge, irresponsible, and largely unsecured loans gave the different taxing agencies an excuse to collect Property taxes at the highest rate they could get away with, and then some.
The problem with collecting all of those Taxes is, most of those sub-prime loans also had no Escrow Accounts attached to them in order to keep the monthly payments as low as possible. That means the Taxes are in arrears and probably un-collectable, and any damage to the Property from any reason is completely uncovered by Insurance. That forces the County to lien the property and attempt to sell it just to recover some of the money they thought they were owed.
Like they say, new Century is like the Titanic, and we are also only seeing the tip of the iceberg on this...
Wow, that is sobering, no question. This reaches much deeper than just some guy who couldn’t make his house payment. I’m guessing you’re a CPA from your screen name - I’ll have to consult one of your ilk before I actually do make a buy, since it was almost me among those ensnared by one of these loans.
Bingo. Not to mention using zoning laws and "greenbelts" to constrain availability of buildable dirt to punch up the sale price and tax receipts therewith.
Of course, the unsavory other side of this is that the foreclosure market is set for a boom. People who were smart enough not to get suckered into the sub-prime loan scam are well-positioned to snatch up foreclosed properties in some pretty nice neighborhoods.
Call your county and say, “Let’s make a deal!”
..and are dumb enough to brag about it.
You continue making payments to whomever buys your loan from the defunct lender. Basically they sell their assets including mortgage notes.
You don’t get out of paying off your house if that’s what you’re wondering!
(I don’t mean YOU specifically)
I wonder how many mortgages were given to illegal aliens...
I can’t seem to work up any sympathy for mortgage brokers. The brother of a friend of mine quit after a short stint because it “was too unethical”.
Thanks Bill Clintoon and Democrats wherever you are. Anybody else remember all the noise about "Fair Lending" back in the early 90's. Clinton and his henchmen were doing colonoscopies on banks that didn't have big enough portfolios in the Inner Cities. Who's paying now? Clinton has most of his millions tucked away offshore I'd bet.
I’m ethical and have been doing it for 6 years. Depends a lot on the company you work for too.
From New Century, probably none - I recall they’re pretty strict on a valid SSN or Tax ID number.
Other lenders I’m not so sure.
“I wonder how many mortgages were given to illegal aliens...”
Hard to say. I think most of the defaulters are likely good ‘ol US Citizens, who believed the Ditech.com ads on TV, treated their homes like vinyl-clad ATM’s, and figured that it was a good idea to borrow 125% of the value of their house on an Adjustable Rate Mortgage; and used the money to finance a family trip to Disneyland, a matched pair of SUV’s in the driveway, a ski boat Ufully accessorized), a pair of jetskis (with matching trailer), big screen TV with the best Home Entertainment Center that they could fit into the “Media Room”, etc, etc, etc....
“Lost another economy to Ditech!”
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