Another Stumble for Subprime Lenders

Stocks in the sector dropped Monday as New Century Financial announced more financing woes and a probe of its trading practices

The subprime mess has taken another ugly turn: New Century Financial (NEW) faces the threat of bankruptcy, as the mortgage outfit grapples with financing challenges as well as an investigation into its accounting and trading practices. The company now has a poorer credit rating and will have a tougher time obtaining needed funding for its business. The company's disclosure of its current predicament after the market close on Friday, Mar. 2, roiled shares in mortgage lenders on Monday, Mar. 5, as investors worried about how companies that sell loans to people with poor credit will survive the weaker housing market (see BusinessWeek.com, 2/19/07, "Out of the Basement for Housing").

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