Significant decline of the stock market today. I always thought the day of reckoning for the real estate boom would be a bottom-up affair, with the rapid spread of foreclosures, but instead it looks like a top-down kind of business:
Last month, the company said it lost track of how frequently borrowers missed payments on their mortgages. Because New Century's books didn't reflect how often borrowers defaulted and how likely borrowers were to default in the future, the value of the company's loan portfolio was overstated.
Last week, it stopped accepting all new loan applications because it hasn't been able to raise enough capital or renegotiate its existing financial agreements. It has since disclosed that all of its lenders have slashed funding or announced their intent to cut it off altogether. The lenders have alleged the company failed to make payments.
The company is now under pressure from several lenders to pay back what it owes them. One of its backers, UBS Real Estate Securities Inc., is demanding New Century's subsidiaries pay immediately some $1.5 billion in repurchase obligations for outstanding mortgage loans, according to documents filed Tuesday with the SEC
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