Shares of U.S. mortgage lenders plunged today after New Century Financial Corp. and HSBC Holdings Plc said losses from bad loans are mounting faster than they’d expected, Bloomberg News reports.
Shares in New Century had their biggest decline since October 1998 after the company said it lost money in the fourth quarter and will need to restate its 2006 earnings. The stock was down $9.08, or 30 percent, to $21.08 at 1:04 p.m. in New York Stock Exchange composite trading.
London-based HSBC, which today announced a shakeup after saying it would need $1.76 billion more than expected to cover bad loans in 2006, was down 2.6 percent.
Both companies blamed their rise in defaults on “subprime” lending to borrowers with heavy debt loads or little credit history.
Other subprime lenders losing ground in today’s trading included Novastar Financial Inc. and Fieldstone Investment Corp., both falling 14 percent, Accredited Home Lenders Holding Co., slipping 11 percent; Fremont General Corp. down 10 percent; and American Home Mortgage Investment Corp. sliding 8.7 percent.
The damage also spread to other lenders, affecting H&R Block Inc., whose Option One mortgage unit is up for sale; Washington Mutual Inc., the nation’s biggest thrift; and Countrywide Financial Corp. and IndyMac Bancorp Inc. All were off between 2 and 4 percent.
