New Century Financial (NEW)
The Irvine, Calif., subprime lender cited "the increasing industry trend of early-payment defaults." New Century expects to post a fourth-quarter loss, where Wall Street analysts were looking for a profit of $1.08 a share.
S'oaky though. The cheerleaders on the Financial Entertainment Network just said the problems were "company specific." Wacth the Philly Housing Index (^HGX) as well. There was good news apparently, there are signs that the rate of cancellations may be "abating." For those who have ever had reason to use calculus I remind you that the second derivative of velocity is "jerk."
5 comments:
interesting article this a.m. on the WSJ* front page about HSBC and how defaults rates are up.
The presidents sounds a lot lie Our Here: "we made mistakes' "gee in retrospect maybe we should do something about stated income loans".
When my wife and I bought our present house 10 years ago, we initially looked at house that was over our budget.... the mortgage broker told us that we could get qualified if we were to persuade my father-in-law to put our names on his bank account so that the lender could run a check on it and see that we have all this damned money in the bank.... I told her that there were a couple of problems with that approach: (1) my f-in-law didn't get all the damned money in his bank account by following harebrained schemes like that (2) why do we want to do something like that to make us qualify for a loan we are really not qualified for (3) its fraudulent and my wife and I could both lose our jobs and our law licenses.
Long story short we ended up buying a house in the same neighborhood that need a lot of cosmetic work, but was cheaper and bigger and for which we qualified after putting 20% down.
Oh,the mortgage broker? About 5 years ago her and several others in her office were indicted and pleaded guilty to mortgage fraud.
http://www.flofr.com/PressReleases/ViewMediaRelease.asp?ID=1568
http://www.mortgagefraud.org/display/ShowJournal?moduleId=78225&filterBegin=2001-03-01T00:00:00Z&filterEnd=2001-03-31T23:59:59Z
In April, Biggins was convicted of submitting, or causing to be submitted, loan application packages containing false and fraudulent verification of deposit and employment forms and false gift letters enticing financial institutions to make loans for applicants. The lenders, in their decision-making process, used the fraudulent information in deciding whether to grant loans.
Great picture.
@ Hobbes
I'm beginning to think that the whole industry is rotten to the core.
Well ladies and gentlemen, time to look at the other players in this industry that are going to lose their shorts soon.
If New Century is an indicator of the subprime industry (which we all know is true) then it's time to short those companies and do some option plays (short some calls, buy some puts).
Any companies to nominate for this play? Countrywide may be too big. Smaller players?
Mortgage Industry Stocks (via Yahoo):
http://biz.yahoo.com/p/447conameu.html
Finance Sector:
http://biz.yahoo.com/p/4conameu.html
Shorting these stocks is like trying to jump off a trainwreck at the last instant. The risks of them being bought out at a premium as we've seen recently, the huge institutional positions willing to prop up the stock or just plain old wipe out the shorts, the possibility of the market remaining irrational longer than you can remain solvent, the possibility that the books are cooked...
No thanks, the thing to do when there's a trainwreck is to step away from the tracks.
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