New Century Likely History Soon
Chuck Ponzi March 9th, 2007
As many in Southern California know, a subprime (or non prime) implosion is underway. Part of the ongoing “Spring Smackdown” coined by me, New Century is having a meltdown of historical proportions. It seems only a few short weeks ago that we heard they were restating earnings and the company is doing fine. Oh, it was just a few weeks ago?
“We feel it is likely that New Century just used up its last option to avoid collapse, and believe a bankruptcy filing or liquidation may well be announced in the next week or two,” wrote JPMorgan analyst Andrew Wessel.
Merrill Lynch & Co. analyst Kenneth Bruce added that, while the financing might provide New Century a “temporary lifeline,” the REIT faces “likely liquidation in bankruptcy.”
Bruce and Wessel wrote that a bankruptcy filing “seems imminent.”
New Century is based in Irvine, although I also know of servicing jobs elsewhere in Orange County (Santa Ana for example). If the company does file bankruptcy protection, there will be quite a few out-of-work employees. I feel compassion for anyone who has found themselves working for an unscrupulous lender without having direct control over their future. Many of them may have never known that any wrongdoing took place. Unfortunately, those who profited from the recent obliteration of lending standards will likely not feel an ounce of pain that their intemperance will cause to a great number of families who will lose their home as a result. We also have compassion on investors who believed what they wanted to believe; that it really was different this time. They will learn the lesson by losing their money as well.
Got this in an email last night from an New Century SAE:
To my valued brokers:
Please read this e-mail in its entirety, as it will inform all of you of the changes with New Century Mortgage.
As you all are aware the industry is going through major changes, which is affecting everyone in the retail and wholesale mortgage industry. Delinquent loans are at an all time high and are expected to continue rising.
In order to overcome market changes and continue to provide you with financing options for your borrowers a company that has yet to be disclosed has bought New Century Mortgage. Information may be available as soon as tomorrow, but likely the beginning of next week. I will keep all of you apprised as soon as I know details of this transaction. I want all of you to know that despite rumors from our competitors and brokers that New Century is NOT going out of business. Yes, there will be program and product changes, but I assure you we are here to stay.
As far as program changes, New Century is no longer offering 100% loans (80/20 or 100% 1 loan) full or stated doc. The demand for this product has completely diminished on Wall Street. These loans are too risky and the default rate is astronomical. New Century is still offering 95% LTV and we can still do the 1st mortgage (80% or 85%) if you have a lender who will fund concurrently to 100% CLTV. Understand that New Century is not the only lender making these changes. The majority of the Alt-A lending community has already made the same changes.
I am also sad to say that the San Diego New Century Mortgage Operations Center will be closed effective Friday March 23rd.
If downpayments become a requirement again, this market is dead.
I was under the impression that NC is no longer funding loans… a little birdie told me cash flow problems exist.
The infusion yesterday was what the gist of the above article/post was about.
Like Irvine Renter said above, if 100% goes away in a substantial part, the first time buyer and move up market is dead. There is no savings in the area for the first time buyer, and noone can move up if noone can buy. Even a 5% down would be very difficult to save for. Because rents are so high, most renters cannot save enough money to pony up the cash.
Families? Yeah, right. Those are Boomer parents.
Chuck Ponzi
Great blog Chuck,
No need for a little bird whispering, the NC website has the press release right on their homepage. The following paragraph says it all:
“As a result of its current constrained funding capacity, New Century has elected to cease accepting loan applications from prospective borrowers effective immediately while the Company seeks to obtain additional funding capacity. The company expects to resume accepting applications as soon as practicable, however, there can be no assurance that the company will be able to resume accepting applications.”
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