More Subprime Lender Woes

Admist the disclosure that New Century was under investigation by the SEC, the subprime mortgage industry took another blow. New Century’s stock dropped 69% on Monday. Other subprime lenders have seen big drops in their price per share since the beginning of 2007: New Century -86%, NovaStar -84%, Fremont -64%, Accredited Home Lenders -41%, Countrywide -17%. Wall Street has fears that some subprime lenders might have to buy back loans from investors in instances when borrowers have defaulted. Expect underwriting conditions to continue to become tighter as investors in the secondary market are becoming leary of the subprime market.

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