Subprime lenders face new pressure

Actions target two companies

March 20, 2007|By Bloomberg News

Accredited Home Lenders Holding Co. may lose its stock listing and other states have moved to bar New Century Financial Corp. from doing business as regulators added to pressure on the two subprime mortgage companies.

The Nasdaq stock market might delist Accredited for failing to file an annual report on time, the San Diego-based company said yesterday in a statement.

And New Century said in a federal filing that Pennsylvania and Ohio are now among 10 states, including Maryland, that want it to stop taking applications after the California company didn't produce money promised to homebuyers.

"We're going to see further intense regulatory pressure coming to bear on subprime lenders," said Frank Barkocy, who helps manage about $125 million at Keefe Managers LLC in New York. "Market reaction will be volatile, depending on the news du jour."

Subprime loans, a term applied to some of the riskiest home mortgages, are made to borrowers with poor credit ratings or high debt burdens. As late payments and defaults rose last year, more than two dozen mortgage lenders closed or sold operations since the start of 2006, according to Bloomberg data.

U.S. subprime borrowers fell behind on their mortgages at the highest rate in four years in the fourth quarter and foreclosures on all types of home loans rose to a record, the Mortgage Bankers Association said last week. Rising defaults have cut investors' willingness to finance mortgage companies, making it harder for them to stay in business.

Funding problems and regulatory run-ins sent stocks of mortgage companies plummeting earlier this month. Shares regained some of the losses last week on comments from Wall Street banks that subprime troubles won't spread to other parts of the mortgage market.

They renewed their slide yesterday after Columbia-based Fieldstone Investment Corp. said the buyer in its previously announced takeover, Credit-Based Asset Servicing and Securitization LLC, cut the price it will pay to $4 a share from $5.53. The announcement cited "severe deterioration of the market for subprime loans."

Fieldstone fell 50 cents yesterday, or 12 percent, to close at $3.60 on the Nasdaq.

Accredited shares fell $1.95, or 17.9 percent, to $8.95. They're down about 66 percent in 2007. New Century shares, which have lost more than 90 percent of their value this year, slipped 17 cents, or 7 percent, to $2.17 in over-the-counter trading.

Fremont General Corp., the third-biggest provider of subprime loans through brokers, told the staff of its home-lending business yesterday that they might be dismissed in two months. Fremont shares declined 83 cents, or 9 percent, to $8.07 on the New York Stock Exchange.

Nasdaq rules required Accredited to submit a 2006 annual report by March 15, Accredited said in yesterday's filing. The company also said it's in talks with an unidentified third party that might provide funding. Accredited said last week that it was selling $2.7 billion of its loans at a discount to pay back creditors.

New Century, the second-biggest U.S. subprime mortgage lender, said yesterday that Connecticut, Maryland, Rhode Island and Tennessee issued "cease and desist" orders to New Century on March 14 and 15, and Ohio got a temporary restraining order from a state court. The company also signed a consent order with Pennsylvania to halt loans, yesterday's filing said.

The states join at least four others that sent similar orders to New Century last week.

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