This is from thestreet.com last Saturday but it’s a good quick summary of the sub-prime lending situation from a stock investors point of view.
The banks that financed the mortgage companies are now forcing the mortgage companies to buy back some of these bad loans and cutting off further credit for new lending. Three subprime lenders, including Mortgage Lenders Network USA, already are in Chapter 11 bankruptcy for reorganization.
The second-largest subprime lender, New Century Financial (NEW – Cramer’s Take – Stockpickr – Rating), plunged 75.6% for the five trading days ending March 8, as it was forced to buy back loans it had previously sold. The company’s lines of credit dried up, new loan activity ceased, and 4% of its workforce has been fired.