Shares of New Century Financial Corp., a subprime lender based in Irvine, CA, fell over 40% in the last two trading days on the New York Stock Exchange to close out at 18.22, well off the 52-week high of 51.97.
The news rocked the already shaken mortgage industry, which had reported numerous notable closures in the subprime sector over the last few months.
New Century reported huge losses and buybacks on their subprime loans, noting a sharp decline in support for mortgage-backed bonds as pools of loans became riskier.
To add to the misery, with New Century likely the last stop on the financing railroad, many borrowers will have few places to turn, with many headed towards foreclosure.
New Century will surely be stuck with a large portfolio of foreclosed homes, and with home prices at or below year-ago prices, it means more heartache for the mortgage lender as buybacks fester.
In related news, London’s HSBC Holdings reported similar results in their subprime unit, much of which came from the purchase of subprime lender Household International Inc., acquired in 2003 for $15.5 billion.
However, HSBC did manage to keep their stock price mostly unchanged because of a more diversified operation.