Fannie Mae, the largest U.S. mortgage loan provider, yesterday informed the once largest subprime lender New Century Financial Corp. that it will no longer buy or sell NEWC mortgage loans. While largely symbolic, FNM's actions may be a death blow: NEWC cannot provide mortgages without the partially government-backed Fannie Mae's business. This is the latest in NEWC's litany of troubles: California yesterday joined a dozen other states in ordering NEWC to stop making new mortgage originations, and to direct current applications to rival lenders. NEWC's banking license is also suspended in New York, it's under investigation by the SEC, the U.S. Justice Department and the Senate Banking Committee, and it has cut 1500 jobs. While NEWC's shares fell yesterday 16% to its lowest ever $1.65, Accredited Home Lenders' shares rose 20% on news that it had received a $200 million lifeline from the Farralon Capital Management hedge fund. NEWC, however, looks increasingly likely to join the privately-held People's Choice Home Loan Co., which yesterday became the latest of more than 20 bankrupted subprime lenders.
Sources: Reuters I, II , East Bay Business Times, Boston Herald, Bloomberg
Commentary: Subprime Fallout: Stocks to Eschew, Stocks to Pursue • Housing Bubble and Real Estate Market Tracker • New Century Jumps 101%; Glad I Sold My Puts
Stocks/ETFs to watch: New Century Financial Corp. (NEWC.PK), Fannie Mae (FNM), Accredited Home Lenders (LEND), Novastar Financial (NFI), Fremont General (FMT), Wells Fargo (WFC), Fieldstone (FICC), PMI Group (PMI), MGIC Investment (MTG)
Related: New Century Home Page
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