The big subprime mortgage lender said 4 more states have issued cease-and-desist orders, joining N.Y. and Mass. Deutsche Bank (DB) asked New Century Fin'l (NEWC) to quickly buy back $900 mil of its loans. New Century fell 7% to 2.17. Accredited Home Lenders, (LEND) which rallied in pre-market on financing talks, fell 18%. Fremont Gen'l, (FMT) which wants to sell its subprime unit, fell 9%.
There's been a steady drip drip drip of bad news from the subprime sector for the last few months. This is simply another one of those drips.
So far the damage has been contained. But I wonder how much longer that will last. While most mortgages are pooled, securitized and sold to investors there are still companies that hold mortgages on their books. Yesterday I linked to an article by Kash over at the streetlight which showed banks are more exposed to this problem then we want to admit.
I have no idea if the proverbial dam is going to burst on this issue. But the signs are definitely worrying.