It's official! New Century has officially filed for Chapter 11 protection. I'm starting to get Dot-com deja vu! The question is whether the mortgage meltdown will be worse than the dot-com meltdown. I suspect that it will be considerably worse as it affects many more people. Stay Tuned!
New Century, Biggest Subprime Casualty, Goes Bankrupt
By Bradley Keoun
April 2 (Bloomberg) -- New Century Financial Corp. became the biggest subprime mortgage company to go bankrupt after the lender, which specialized in loans to people with poor credit records, was overwhelmed by customer defaults.
The company filed for Chapter 11 protection today in Wilmington, Delaware, from creditors that include Morgan Stanley and Goldman Sachs Group Inc. About 3,200 people, more than half the workforce, will lose their jobs at the Irvine, California- based company, which said it agreed to sell its mortgage billings and collections unit to Carrington Capital Management LLC for $139 million.
New Century rode the U.S. housing boom to become the largest independent provider of mortgages to borrowers with low credit ratings, only to collapse into insolvency as a rising number of customers failed to repay their loans. New Century extended about $60 billion in loans last year, second only to London-based HSBC Holdings Plc in total U.S. subprime mortgages granted.
``They're clearly going to be the poster child for bad practices in the mortgage industry,'' said Matthew Howlett, an analyst at Fox-Pitt Kelton in New York. ``When all is said and done, the management team will be to blame.''
Late payments on U.S. subprime mortgages reached a four-year high in the fourth quarter, the Mortgage Bankers Association reported. At least 30 home lenders have halted operations or sought buyers in the past 12 months, including four that have gone bankrupt since last November, according to data compiled by Bloomberg.
