'Crossing My Fingers, and Hiding Under the Desk'
From News10:
With home sales slowing down, mortgage defaults and foreclosures are hitting record highs -- and all indications are that the dark side of the housing boom could get worse.From the OC Register:
"The sky is not falling yet and if we work together, we can prevent that from happening," said Mary Harman from the California Association of Mortgage Brokers. "We are trying to provide solutions to correct things."
...
"There is a certain amount of responsibility that needs to be assumed by everybody in order for us to correct this and get the state to get back on the right track," said Harman.
[California Association of Realtors Chief Economist Leslie] Appleton-Young noted that California already is in a market slowdown that's lasted 1 ½ years. Any restriction on the money supply for subprime borrowers will make the recovery longer, particularly in those inland regions that rely more heavily on that kind of financing. Fewer subprime loans will mean there will be fewer buyers, she said.From the Orange County Business Journal:
John Laing is keeping close tabs on the impact of subprime loans in some of the outlying areas it builds, such as the Inland Empire and Central Valley, [Chief Executive Larry] Webb said. Most of the company’s luxury and move-up homes aren’t likely to be bought by subprime borrowers.
But its move-up homebuyers could have trouble selling their existing homes if the subprime market disappears. "To date, we have not seen (a problem)," he said. "We are watching it. You can say I’m crossing my fingers, and hiding under the desk."
1 comment:
Down goes New Century
NEW YORK (Reuters) - New Century Financial Corp. (Other OTC:NEWC - news) filed for bankruptcy protection on Monday, hit by rising homeowner defaults and cut off by its creditors, in the biggest collapse of a mortgage lender as the U.S. housing market slumps.
ADVERTISEMENT
The Irvine, California-based company fired 3,200 employees, or 54 percent of its workforce and said it will sell its assets through the Chapter 11 bankruptcy process.
New Century's demise came less than two months after the company first disclosed difficulties with its loan portfolio. The problems worsened as lenders forced it to repurchase billions of dollars of bad loans.
Prior to its downfall, New Century had been the largest independent U.S. provider of home loans to people with poor credit histories. Many other such "subprime" lenders are also struggling with rising defaults and growing demands from their own lenders.
"We are only at the very beginning of the problems facing subprime," said Sanford C. Bernstein & Co. analyst Brad Hintz. "This liquidity crisis is continuing in the marketplace."
New Century filed for protection from creditors with the U.S. bankruptcy court in Wilmington, Delaware.
It announced an agreement to sell its loan servicing assets and platform to Carrington Capital Management LLC for $139 million. The company also lined up $150 million of financing from CIT Group Inc. (NYSE:CIT - news) and Greenwich Capital Financial Products to keep it operating while in bankruptcy.
Both transactions require bankruptcy court approval. The company also agreed to sell Greenwich Capital some loans and other assets for $50 million.
NECESSARY
Selling assets was "clearly not the outcome I would have preferred," but necessary "given the sudden and significant challenges facing our industry and New Century specifically," Chief Executive Brad Morrice said in a statement.
New Century was founded 12 years ago by three men who had helped found Option One Mortgage Corp., a subprime lender that H&R Block Inc. (NYSE:HRB - news) owns and is now trying to sell.
The lender's business mushroomed this decade as home prices rose, especially in its home state, and borrowing costs stayed low.
But investors began to pull out after New Century on February 7 said it would post a surprise fourth-quarter loss and would restate results for the three previous quarters. It later announced a criminal probe into its accounting and into trading in its stock. Lenders fled.
Among New Century's largest unsecured creditors are Bank of America Corp. (NYSE:BAC - news), Credit Suisse Group Inc. (CSGN.VX), Citigroup Inc. (NYSE:C - news), Countrywide Financial Corp. (NYSE:CFC - news), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc. (NYSE:GS - news), Lehman Brothers Holdings Inc. (NYSE:LEH - news), Morgan Stanley (NYSE:MS - news) and UBS AG (UBSN.VX), court papers show.
Lazard, AlixPartners and the law firm O'Melveny & Myers LLP are advising New Century in the bankruptcy process.
The company's shares rose 2 cents to $1.08 in morning trading on the Pink Sheets
Who's next?
Post a Comment