From Alistair Barr at Marketwatch.
'SAN FRANCISCO (MarketWatch) -- New Century Financial Corp. said late Thursday that it has stopped accepting loan applications because some of the subprime-mortgage specialist's financial backers are refusing to provide access to financing.
New Century also said that it has received $150 million worth of margin calls from its so-called warehouse lenders. It has satisfied about $80 million of those calls, but $70 million remains, according to the company.
"As a result of the current constrained funding capacity, the company has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity," New Century said in a statement. '
Wow - got no money, got no car, got no women, so there you are. (credit Young MC for that genius line). Maybe they could get some crap-ass financing from a pay-day lender to keep them afloat.
'"The company expects to resume accepting applications as soon as practicable; however, there can be no assurance that the company will be able to resume accepting applications," it added. '
Translation: "Put a fork in us - we're done. We'll start accepting loan applications as soon as we get bought by another company. But then agian, who would want to assume our horrific portfolio?"
'Lenders specializing in such loans, like New Century, rely in part on big banks known as warehouse lenders to finance their operations. These backers require that subprime lenders meet certain minimum financial targets; otherwise, they have the right to end the business relationship.
On Friday, New Century said it had breached one of those requirements, or covenants, and also disclosed that it's the subject of a federal criminal investigation. See full story.
New Century said on Thursday that it has yet to get waivers on this covenant from five of its warehouse lenders, having made no progress on this point since Friday.
"Once you get hit with one of these crunches, warehouse lenders don't want to lend to you, so you're really done," said Joseph Mason, associate professor of finance at Drexel University's LeBow College of Business and a visiting scholar at the Federal Deposit Insurance Corp.
Mason, who recently published a study on the subprime mortgage market, said he's expecting more bankruptcies in the sector. '
The lending implosion continues. With less money avaible for mortgage borrowing, it can only hasten the demise of our giant, cancerous bubble. Bad medicine for sure, but the cure is on the way.