New Century Recieves C&D

Well you heard here first but now it's official, Irvine based New Century has received a Cease and Deist order from the State of California and Fannie Mae will stop buying their loans.

It's apparent that the chicanery over at New Century has gone well beyond simply foreclosures on the sub prime market.

"The filing also said the company has received cease-and-desist orders from California. The state alleges that New Century illegally failed to fund mortgage loans after closing."

Someone is going to jail.

Defaults begin sink companies

To quote Queen, "Another bites the dust". This time the mortgage company going under is Irvine based sub prime provider, New Century Financial Corp. It's creditors have cut it off as the defaults in the continue to rise. What's more telling is the percentage of sub prime loans, and their marketshare have skyrocketed in the last three years, going from 6% of the market to 22% of the market. Foreclosures and defaults will have a ripple effect throughout the California housing market.

The so-called sub-prime lending industry that specializes in loans to risky borrowers has been tormented for months by soured loans, creating huge losses and forcing about three dozen large lenders to be sold to other companies, to file for bankruptcy protection or to close operations altogether.

On Monday, New Century announced that the Wall Street firms that supplied its funding had either cut off fresh capital or were poised to do so, leading some industry observers to say bankruptcy was likely. The company's stock plunged $1.55, or 48%, on Monday to $1.66 before the New York Stock Exchange halted trading.

Less than a year ago, New Century shares were worth nearly $52 each.

As New Century's stock sank, those of other sub-prime lenders suffered too. Santa Monica-based Fremont General Corp. fell $1.30, or 16%, to $6.73. The firm said last week that it would exit the business under pressure from regulators.

Homebuilder shares also stumbled on fears that they will have fewer customers. Hovnanian Enterprises Inc. fell 6% and Pulte Homes Inc. dropped nearly 5%.

This is likely affect other mortgage providers with less exposures and will lead to a much needed tightening of lending standards. This will exert a downward pressure on California homes in several ways. First of expect more distressed sales of homes, secondly expect fewer offers on your home for sale since their will be fewer buyers competing for it.