Thursday, March 08, 2007

"...the Company has elected to cease accepting loan applications..."

NEW 8k filing out today. Watch the action in this thing tomorrow. Here is the most important part of the filing:

The Company has only been able to fund a portion of its loans this week. In addition, its capacity to fund new originations is substantially limited due to its lenders’ restrictions or refusals to allow the Company to access their financing arrangements. The Company has been in frequent discussions with its lenders to identify ways to address their concerns in order to allow a greater funding volume in the near term. However, there can be no assurance that these efforts will succeed.

As a result of the Company’s current constrained funding capacity, the Company has elected to cease accepting loan applications from prospective borrowers effective immediately while the Company seeks to obtain additional funding capacity. The Company expects to resume accepting applications as soon as practicable, however, there can be no assurance that the Company will be able to resume accepting applications.


asuwest said...

So anyone know how many people are directly employed by them in the OC? Do the words "emergency fund" just roll off the tongue?

Bakersfield Bubble said...

The OC is screwed.

During 2005 and 2006 most people on Ben's blog knew Orange County as the home of subprime and when the meltdown occurred, that area would be in big trouble.

Anonymous said...

I love this site.


Anonymous said...

Armeriquest will be up to bat soon. Want to see how hard they are working?

Anonymous said...

This week we went through the pre-approval process with two Banks and one online lender. We have high fico’s great jobs, 20% down and plenty of cash and savings etc,and we were approved for less that we were in 05 (last pre-approval) by almost 30k.

My rep. at WF who did our last loan said with all the problems they are starting to have to roll back some and everybody is going to be a little less giving, maybe a lot less. This is really getting interesting.

The house is in OC, Lake Forest, family home, aunt going into a home, we will be paying about half or may sell it because it needs work. 4 years ago it was a nice street, now its over run with too many multi families, taking up the the block with cars garages used for dens or storage etc.. I'm sure the comps will suck after this one.

Darth Toll said...

"My rep. at WF who did our last loan said with all the problems they are starting to have to roll back some and everybody is going to be a little less giving, maybe a lot less. This is really getting interesting."

Exactly. This is the very definition of a credit crunch - or at least the beginnings thereof. Now we'll get to observe just how real this "sea of liquidity" is.

Anonymous said...

reading the 8K in full now

First, there is currently a liquidity problem. Someone (rumored MS) extended $265m in financing for current obligations ("closed but unfunded" loans?) and also refinanced $700m more. The presumption here is that this became necessary because SOME OTHER LENDER forced repatriation of loans and perhaps even threatened to enforce a margin call, which would have been VERY VERY BAD. As in perhaps an involuntary 7 filing against them!

However, there is currently no additional capacity to fund new applications, thus, there is no new business coming in the door.

So it sounds like that lender (MS?) took on obligations that the other lender had "PUT" back on the company. What's not known is at what discount this was done - it could have been done at a crazy discount (e.g. $1b worth of loans carried back for $265m of money + refi'ing $700m of old loans that were to be "PUT" back), which doesn't look bad for MS at all. There's no risk to them as its all debt securities which are now theirs, bought and paid for. This much I think we can be certain of - MS didn't take on any material amount of risk, and they most certainly were in the driver's seat on their negotiations in this matter - they could demand damn near anything in terms of a discount rate, and since they're buying debt, unless a BK Judge was to forcibly unwind that transaction (damn unlikely given that MS would then have to have their funds repatriated!) that bank (MS?) basically wrote their own deal. When you've got someone's back up against the wall and you're wielding a gun, you can pretty much name your terms.

But this doesn't solve New Century's problems in any way - all it did was prevent a shutdown that was looming. They still have $70m worth of outstanding margin calls and, it appears, no money to meet them with. They also have no more money to make new loans with. And they have have five lenders in default at present with no waiver, presumably the same ones that have the outstanding margin calls. NONE OF THIS IS AFFECTED BY THE MS DEBT PURCHASE! THEY'RE STILL STUCK WITH THIS PROBLEM!

Einhorn appears to have been released from his restrictions on trading in the stock he bought (Greenlight), and it would appear from the tape today that he dumped all, or substantially all, of his shares. This is NOT a good sign. He took a HUGE bath on those shares and there is only one reason that you'd expect he'd willingly absorb that sort of loss - he figured that he was screwed even worse if he didn't!

All of this is TREMENDOUSLY negative. I don't CARE what someone was told as an employee - if there is anything materially false in the 8K, PEOPLE WILL GO TO PRISON. As a consequence I believe the 8K is accurate in all material respects.

I see ABSOLUTELY NOTHING positive in the 8K.

Anonymous said...

Its over . There is no way these sub-prime lenders can carry their own garbage loans or discount them enough to get them sold .

I think this is a very fitting demise for these lenders to be stuck with the crap liar loans they made . Now let's see if time in jail might be in the cards also for these creeps .

The sub-prime lenders were not nice people ,make no mistake about that .

Mozo Maz said...
This comment has been removed by the author.
Mozo Maz said...

If you think about it, a cash-in refi is kind of like an acceleration clause. The lenders need the money ahead of schedule, to grease the credit crunch.

"You want a refi? Hey, we got our own problems, pal.... No more 100% financing. No more housing ATM. Open up that mattress, and pony up some cash this time!"

Perfect Storm said...

The sub-prime lenders were not nice people ,make no mistake about that .

I agree, but we can do better than that, they are bunch a-holes my friend and they need to have their teeth kicked in.

When economy tanks just look for your ex-subprime lender and tear him a new hole.