It appears that two subprimer lenders New Century Financial (NEW) and Novastar Financial (NFI) have dropped about 90% since their 1 year highs. These drops have occur precipitiously within the last month.
Today the NEW CEO stepped down and the company is considering entering chapter 11 bankruptcy. But foreclosures haven't really spiked up in January to push these mortgage companies into the red. I wonder what is going on? The housing market has supposedly been in the dumps for months now. Yet the number of foreclosures does not seem terribly high. I also think that these foreclosures are localized more on the coasts where risky loans had become the norm.
Yet in the middle of the country and southern states, the price of homes did not skyrocket these past 6 years. So is there a lot of danger in assuming that the only potential pitfalls in home lending is in very few, high COL cities?
I bought NEW for my CNBC portfolio today. We'll see how it goes.
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