Shares of subprime mortgage lender New Century Financial dropped 68.87% or $10.09 to end the day at $4.56, the company’s lowest price in roughly five years.
The sharp drop was blamed for several reasons, including comments from the company that it was in default with many of its warehouse lenders, along with the fact that federal regulators were looking into their financials and recent stock trading.
New Century also announced that it will be late in filing its annual 10-K financial report with the SEC as it continues to struggle with debts, loan defaults, and repurchases from its risky subprime lending practices.
But even with tougher underwriting guidelines, the amount of repurchases and loans in default could spiral the company into bankruptcy, especially with a perceived decrease in production as a result of the underwriting changes and the current market climate.
This news comes after New Century announced revised loan production guidance for 2007 which should be roughly 20% less than a year ago.
The sliver of good news is that January loan production rose to $4.2 billion, a 5% increase from 2006 levels.
The fate of company is now in the hands of the warehouse lenders, and with news of a late filing, the pressure to sever ties with New Century has grown, and may leave the company with little choice but bankruptcy to restructure.
In related news, shares of Countrywide Financial dipped 5%, IndyMac Bancorp shed 8%, and Impac Mortgage Holdings lost a massive 32%.