This can’t be good. New Century, the 2nd biggest mortgage lender, says it’s running out of cash.
New Century may be insolvent because too many of its own customers — most of whom have poor credit histories or heavy debt burdens — aren’t repaying their loans. Bad U.S. subprime mortgages are at a seven-year high, forcing more than two dozen lenders to close or sell operations. Their woes may contribute to more than 1.5 million Americans losing their homes and 100,000 people losing their jobs, according to real estate executives, economists, analysts and a Federal Reserve governor.
New Century said in a federal filing it doesn’t have funds to repay lenders including Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. The creditors want New Century to repurchase all outstanding mortgage loans they financed.
For those out there with subprime mortgages, or those thinking about it, beware– this move will make it harder for you to get them. If these things are bankrupting the #2 lender in the real estate business, then there’s no reason to continue with them.
My advice: get on a budget, stop spending on credit, and eliminate the debt. Pretty much the same advice I’d give to the Federal Government.