Irvine, Calif.-based subprime mortgage lender New Century Financial Corp., one of the largest issuers of subprime mortgage ABS in the market, last week announced that it's having difficulty selling loans to secondary market investors. Pointing to market conditions, company representatives during a conference call said whole loan bids were substantially lower than expectations - while some sources say bids for the company's loan pools are well below those of its competitors, forcing it to sell at least one recent pool of loans at a loss.
Its loan pools are being priced 30 to 50 basis points lower than comparable levels seen 30 days ago, according to New Century - the squeeze may reduce the company's operating margins to 30 to 50 basis points in the fourth quarter, compared with earlier estimates of 80 to 100 basis points. On Sept. 23, citing the lower bids and anticipated losses from Hurricanes Katrina and Rita, New Century lowered its annual earnings outlook to between $7.25 and $7.75 per share, versus a previous range of $8.25 to $9.00. Prior to August, the company's full-year earnings estimate was above $9.00. New Century shares have fallen nearly 50% this year, and in the hours following its earnings revision New Century's shares fell 10%.