We're Just at the Start of this Thing

"There's more trouble in the mortgage lending market — and that could mean problems for higher-risk borrowers who want to refinance their home loans."

"The shakeout in the sub-prime industry began last year as housing prices leveled off and interest rates rose, curbing demand for loans. At first, some companies loosened lending standards to keep loan volume high, a tactic that has produced a wave of early loan defaults."

"New Century is the second-largest sub-prime mortgage originator after San Francisco-based Wells Fargo, with HSBC just behind in the No. 3 slot. The Irvine company said late Wednesday that it had greatly underestimated the losses it would record as a result of loan buyers forcing it to repurchase mortgages that had quickly fallen into default."

"It said it would record a loss of undetermined size for the fourth quarter, rather than the $1.08-per-share earnings Wall Street was expecting. New Century also said it would revise downward its financial results for the first nine months of last year.""As much as $800 billion of adjustable-rate mortgages will reset to higher payments this year, and 1 of 11 home loans is both adjustable and sub-prime, according to the Mortgage Bankers Assn."

'"There could be a good chunk of borrowers with nowhere to go to get loans," said Gast, who follows the industry for the Center for Financial Research and Analysis, a Rockville, Md., forensic accounting and due diligence firm with mutual funds, hedge funds and insurers as clients."It means a lot of people are going to lose their homes."'

"Shares of U.S. mortgage lenders plunged after New Century Financial Corp. and HSBC Holdings Plc said losses from bad home loans are piling up faster than they expected."

"Both New Century and HSBC blamed rising defaults on so- called subprime loans they made to borrowers who had little credit history or heavy debt loads. Defaults on subprime loans increased nationwide last year as competition and a slower housing market prompted lenders to lower their standards and give mortgages to borrowers who couldn't make their monthly payments."

'``It's kind of a watershed moment where the magnitude of the problems really is starting to come to the surface,'' said Brian Horey, general partner at Aurelian Partners LP in New York, which has sold short shares of New Century. ``If you could fog a mirror, you could get a loan.'''

"Among subprime loans, delinquencies of more than 90 days plus foreclosures and seized properties are at their highest level in at least six years, according to a Friedman Billings Ramsey Group report."

'``That is the one area across all businesses in all firms that is actually in a bit of trouble now,'' David Viniar, chief financial officer of New York-based Goldman Sachs Group Inc., said today about subprime lending. ``That market's going to get worse before it gets better.'''

'``There's a lot of camouflaging going on in credit quality,'' said analyst David Hendler at CreditSights Inc. in an interview late last month. ``We're getting the sense in this shop that this is more than normal deterioration, that it speaks to deeper difficulties.'''

"Cooling demand for the mortgages spurred lenders including Wachovia Corp. and KeyCorp to shut or sell home-loan units in the past year. National City Corp. sold its First Franklin mortgage unit to get some of the riskiest loans off its books."

"Washington Mutual CEO Kerry Killinger blamed worse-than- expected erosion in credit quality among subprime loans for a $122 million fourth-quarter loss at the Seattle-based company. At IndyMac, CEO Michael Perry told shareholders Jan. 16 the Pasadena, California-based lender missed its own profit forecast as defaults increased."

"Chris Hagedorn, a money manager at Fifth Third Asset Management in Cincinnati. Hagedorn, whose company oversees $21 billion, wonders why bankers aren't more pessimistic. ``I got the sense that they're saying we're just at the start of this thing,'' he said on Feb. 5."

"Federal Reserve Governor Susan Bies said last month regulators are particularly worried about lenders that added layers of risk by combining low down payments with low documentation, or with interest-only loans that allow borrowers to skip payments and add the sum to the total amount of the loan."

"The Fed added a special set of queries on bad loans to its regular quarterly survey of senior loan officers. The Feb. 5 report found half expect credit quality on non-traditional mortgages, such adjustable-rate and interest-only loans, to get worse in 2007."