Investors received a rude wake-up call Wednesday when instead of reporting earnings as scheduled, New Century Financial Corp., the nation's second-largest sub-prime lender, announced it was pushing off its earnings release, and that shareholders should expect a surprise loss in 4Q06 instead of the $1.06 EPS the Street was expecting. Research firm First American LoanPerformance says that in November, payments were overdue on 12.9% of sub-prime loans packaged into mortgage securities, vs. 8.1% a year earlier. New Century's announcement came less than a day after HSBC reported its sub-prime division was also under significant pressure from rising defaults.
I hadn't realized the New was expected to report income of $1.06/share. That makes their reporting a loss that much more surprising.
In addition, notice the huge jump in late payments indicates there are serious problems in the sub-prime market. This issue isn't going away anytime soon.