Delinquency on indirect auto loans rose from 2.35% last quarter to 2.57%, the highest since spring 2001.
Delinquency on home equity loans rose from 1.79% to 1.92%.
Credit card delinquency declined one basis point to 4.56%.
ABA via Reuters
The Wall Street Journal takes an interesting look behind the scenes of New Century’s liquidity crisis and collapse.
In February, New Century mortgages that had been worth $8 billion fell by more than $300 million within days, someone familiar with the matter says. The result: More lenders demanded additional collateral, also called margin, from New Century, including Goldman and Credit Suisse, people familiar with the matter say. Banks also invoked terms allowing them to demand that the company buy back loans if borrowers failed to make payments.
[snip]
New Century was running out of options. It was unable to get new financing and in violation of its existing lending agreements, in part because it was low on cash. So the company convened the March 6 conference call with its 11 lenders. Mr. Morrice, the CEO, was joined on the call by New Century board member David Einhorn, who runs Greenlight Capital, a New York hedge fund that owned 6% of the company’s stock, which by then had fallen 70% in two weeks.
Citigroup moved forward with a decision to declare New Century in default. Others followed. The next day, Mr. Einhorn resigned from New Century’s board. Though Morgan Stanley agreed to a $265 million loan, it demanded as collateral a loan portfolio worth even more, and reversed course a few days later and cut off additional financing.
On March 12, New Century announced that it couldn’t pay its creditors and that all lenders had halted financing. The New York Stock Exchange suspended trading in New Century shares as a filing for protection from creditors in federal bankruptcy court started to seem inevitable. (The stock now trades on the Pink Sheets at $1.11 a share, down from the 52-week high of $51.97.)
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Among the key points of the MBA’s analysis:
Subprime loans accounted for about 20 percent of all mortgage originations in the first half of 2006, according to MBA’s Mortgage Origination Survey. Contrary to many perceptions that subprime loans are just a way for people to refinance their way out of other debt problems, many consumers use subprime credit to purchase a home. In the first half of 2006, 45 percent of subprime originations were for the purchase of a home. 25 percent of these purchase loans were by a first-time homebuyer.
Subprime loan performance is fundamentally a result of local economic conditions, not the loan terms or the product. For example, the fact that the seriously delinquent rate (loans in foreclosure and 90 days or more past due) for subprime adjustable rate loans in Ohio is six times that of Arizona is due to the local economic conditions in the Ohio, not problems with the loans. Similarly, the seriously delinquent rate for prime fixed rate loans in Ohio is nine times that of Arizona.
Analysis
Mortgage applications were down a seasonally adjusted 0.2% from last week, but up 16.6% from the same week last year.
MBA Survey
“It’s unlikely that any of these mono-line subprime lenders will be around on a stand-alone basis in a year,” Robert Napoli, an analyst at Piper Jaffray, said. “Weak players will disappear and the originators that are left will be backed by much stronger players with more capital.”
The shakeout is well underway. Of the top 25 subprime mortgage originators last year, only three — New Century, Accredited and NovaStar — remain independent specialists. At least 10 have gone bankrupt, been sold or are for sale. Most of the rest are already owned by larger companies.
MarketWatch
They also include a table listing the status of 25 leading subprime lenders here.