What Happens When The Mortgage Lender Goes Belly Up ???....
This happens is what happens,
Subprime mortgage lender New Century Financial Corp.'s problems deepened Tuesday as the New York Stock Exchange took steps to delist its shares and the company disclosed that the Securities and Exchange Commission was conducting a preliminary inquiry into the accounting errors that inflated the value of its loan portfolio.
The company disclosed earlier this month that a federal prosecutor in California is conducting a criminal investigation into its accounting errors and trading in its securities.
most likely followed shortly by jail.
This was the most quotable statement in my opinion
Last month, New Century said it lost track of how frequently these borrowers missed payments on their mortgages. Because New Century's books didn't reflect how often borrowers defaulted and how likely borrowers were to default in the future, the value of the company's loan portfolio was overstated.
And I guess that the borrowers defaults weren't the only thing they were ignoring :
- A board member at battered subprime lender New Century Financial Corp. (NEWC.PK: Quote, Profile, Research) last month sold $2.75 million worth of stock amid a 36 percent plunge in the company's share price, U.S. regulatory filings show.
The director, Michael Sachs, said he was not aware the shares were being sold until after the February 8 transaction was completed, according to a filing with the Securities and Exchange Commission. Since then, lenders have stopped providing funding to New Century, pushing the company toward bankruptcy.
Read all about it here
Say what!!!! They LOST TRACK of how many people defaulted and were late and that one of the Directors was bailing away from that garbage scow as fast as he could. And of course for all those that thought mortgages were a great investment.
New Century's stock has plummeted 96.8 percent since a 52-week high of $51.97 last May. The stock traded last at $1.66.
And new Century is not the only one. This whole thing may make Enron look like light fingers in the collection plate before all this is out , as the Big Banks go from chummy with borrowers and RE people to chum. I just love the way Forbes talks.
As the sharks circled beleaguered subprime lender New Century Financial Monday, speculation also swirled about which investment banks held the most exposure to the sector.
Wall Street has enthusiastically financed mortgage lenders over the latest real estate boom cycle, providing loans for companies such as New Century (nyse: NEW - news - people ) to fund new mortgages that the investment firms could buy up, package into bundles of securities and sell to yield-hungry investors. More than $1 trillion of these mortgage-backed securities were sold in the U.S. alone last year.
Read the article for the list of who's got their junk hangin' out.
It's beginning to look like a game of who's going to be left holding the fussy end of the lollipop .
So now they're getting it.
Late mortgage payments are up up up, in fact to a 3 1/2 year high according to this article
The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported that the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.
That marked a sharp rise from the third-quarter's delinquency rate of 4.67 percent and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97 percent.
The association's survey covers 43.5 million loans.
The latest snapshot of the mortgage market comes amid mounting concern on Wall Street about troubles facing subprime lenders who make loans to people with poor credit.
Sonoma Housing Bubble's been like a voice crying in the wilderness. We've had everything but the sandals and goatskin cape, but who noticed??? Certainly not the Out Of Town Investor who's building the spec house up the road from us, with a sweeping view of the valley. This sucker bought the lot recently. A private little chat with a certain birdy who knows whatof they speak says that the final construction cost will come in at upwards of 1 milllllllllliion dollars. If the investor is lucky, and seeing that they're putting their spec house up this year I wouldn't go to Vegas with them.
And then there's the other guy who's got his place around the corner up for over 2 mill, wonder how he's doing??
This is going to be a very interesting summer season housing wise. There are about 5 houses for sale alone on the street where the spec house is going up. One has been for sale for close to a year. I don't think prices will be going up. As to the spec house being built; it stands on the edge of a cliff ...in more ways than one.