In the clearest sign yet of how rapidly funding is vanishing for the risky loans that helped fuel the housing boom, nervous creditors forced New Century Financial Corp., the nation's second-largest subprime mortgage lender, to stop making new loans.
The Irvine, Calif., company, which has been plagued by rising defaults on its subprime mortgage loans -- home loans made to borrowers with weak credit -- said it has been in talks with its creditors to "identify ways to address their concerns" and obtain more funds in the near term. But it added that "there can be no assurance that these efforts will succeed."
Yesterday, people close to the matter said New Century got fresh financing from one of its biggest creditors, investment bank Morgan Stanley. Even so, the company's mounting woes intensified speculation that it may be forced to file for protection from creditors under Chapter 11 of the federal Bankruptcy Code unless it can find a suitor or sell assets soon.
I doubt this will be the last we will hear of New Century Financial or the subprime market.