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What a tangled web they Weaved

New Century Financial Corp (newcq) has set the stage for all lenders. Their stock has gone from an astonishing $43 to a Meir .08. with trouble still at its door step one can only doubt their return back into the norm. why have the lenders put themselves in a situation that some of which can't come out of. nearly 12 sub prime lenders have been put out of business. arn't these lenders suppose to have educated people that know what too much risk is, and when to take a risk. I don't get how so many companies made so many mistakes. you'd think that only a few would make mistakes so costly that they would extinct themselves from the business.

Posted by Tony Saco on 08/22/2007 10:22 PM

Comments (5)

new century, sub prime

5 Comments on What a tangled web they Weaved

AUG

2007

Hope you sold when it was HIGH!

Wow!! If they are not going under it might be a chance to watch and maybe jump on the stock before they start to make a come back. In all actuality you hit the nail on the head.

you dont want to jump on the stock now, they are in bankruptcy and once they come out (if they ever do) their stock will be worthless, and new stocks will take over. Like for instance Delta airlines, their stock -dalrq- was worthless after they came out of bankruptcy and who ever had shares in the company lost ALL their money. but they could buy it back for 20.00 dollars a share. so they basically lost.

I wouldn't blame the lender. The majority of the mortgage lenders turn around and sell the loan to an investor right after the closing. This is called the secondary market. The investors pushed the lenders to make riskier and riskier loans because they could charge high interest rates. The thought being ..a higher interest rate equals more profit. Well as everyone knows today, through hind-site, those weren't the best decisions. Now many lenders are going out of business because the 'Investors" are no longer Investing in Mortgage backed securities. If the Investors are not buying Mortgage back securities then the secondary market drys up. The secondary market is what provides liquidity to the mortgage industry..... No liquidity, no mortgages. If the lender can't turn around and sell the loan, then they can no longer stay in business. Plus EVERYONE was profiting from skyrocketing home values and low interest rates. The cost of money was cheap. It was a much "safer" investment in mortgage backed securities when housing values were rising, and interest rates were low, but once rates increased & housing values stopped rising and especially when values started decreasing, many people started getting into trouble. Along with many companies and now the 'Investors".

Just my 2 cents worth,
Sean Allen

creating loan programs and loaning money to people with bad credit history is never going to work in the long run.

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