New Century Financial Corp. is expected to make an announcement early Monday about the home-mortgage company's efforts to cope with a cutoff of credit from its lenders, people familiar with the situation said.
The company is widely expected to seek relief from creditors through a bankruptcy filing.
New Century ranked second last year among lenders to subprime borrowers, those with weak credit records or large debts in relation to their income. The Irvine, Calif.-based company has become an emblem of the recent turmoil in the subprime market caused by a loss of confidence among investors who buy loans from such lenders. A rash of defaults has scared away investors and forced New Century and many other lenders to repurchase soured loans they had sold to Wall Street packagers of securities backed by mortgages.
Notice has quickly this has happened. New Century's problems first surfaced within the last three months; now the 2nd largest subprime lender in the country will probably declare bankruptcy.
The speed with which this has happened should concern everybody.