New Century Financial Corp. voluntarily ceded the right to sell or buy loans from Freddie Mac, the semi-governmental, second largest U.S. mortgage backer, just one week after its big sister Fannie Mae cut NEWC off. NEWC's SEC filing says other lenders who have offered $17.4 billion of credit-- $8.2b of which was utilized-- will also auction off collateralized loans as Barclays and Morgan Stanley will of $900 million and $2.5b respectively. NEWC also owes $1.5b to UBS AG, and $900m each to Credit Suisse Group and Deutsche Bank AG. The move brings NEWC closer to bankruptcy -- possibly as early as Saturday. NEWC had reportedly been trying to use mortgage auctions proceeds to pay off part of its debt, or hoping a buyout will enable a prepackaged bankruptcy. The NY Times says NEWC's most valuable asset is its mortgage loan software platform, but analysts agree that only the auction proceeds will clarify NEWC's asset values. With federal investigations pending, Ohio borrowers foreclosure proceedings suspended, cease and desist agreements with several states—Idaho, Iowa, Michigan and Wyoming signed yesterday -- and class action/civil suits in preparation, buyers will likely beware. NEWC.PK shares fell 21.23% to $1.11 yesterday.
Sources: Bloomberg, Reuters, San Jose Mercury News, SmartMoney, Law Fuel, Dayton Daily News
Commentary: Subprime Fiasco: A Bargain Hunt For Value Players? • California, Fannie Mae Sever Ties With New Century • Irvine, California: No Longer the Silicon Valley of Subprime
Stocks/ETFs to watch: New Century Financial Corp. (NEWC.PK), Fannie Mae (FNM), Freddie Mac (FMC), Barclays (BCS), Morgan Stanley (MS), UBS AG (UBS), Credit Suisse Group (CS), Deutsche Bank (DB), PMI Group (PMI), MGIC Investment (MTG)
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