Sub-Prime Plunge Continues: New Century Down 72%
According to Bloomberg News on Monday March 5th 2007, the evolving carnage in the United States sub-prime mortgage market continues. Late on Friday March 2nd, one of the four largest sub-prime lenders, New Century Financial Corp., announced that it was the subject of civil and criminal investigations by the Securities and Exchange Commission and the U.S. Attorney for the Central California district. Also late on Friday, another of the four largest sub-prime lenders, Fremont General announced that it was exiting the sub-prime mortgage business after signing a cease and desist order with the FDIC about inadequate lending standards and the origination of many poor sub-prime mortgage loans.
Of course, it also does not help when the federal financial regulators step in to tighten lending standards as the did on March 2nd. Nonetheless, the brutal sell-off on March 5th has been most impressive.
As the Bloomberg story indicates, "shares of New Century Financial Corp. have suffered their biggest drop ever, leading a decline in subprime mortgage companies and less-risky lenders. "New Century, the biggest lender specializing in mortgages to people with poor credit records or heavy debt burdens, plunged 72 percent to $4.12 in 3:38 p.m. New York Stock Exchange composite trading. Fremont General Corp. slumped 31 percent, Accredited Home Lenders Holding Co. lost 29 percent and NovaStar Financial Inc. declined 45 percent. Countrywide Financial Corp., the largest U.S. mortgage lender, fell 4.5 percent."