Accredited, New Century lead subprime meltdown

By Jonathan Stempel and Dan Wilchins

NEW YORK (Reuters) - The mortgage meltdown broadened on Tuesday, led by Accredited Home Lenders Holding Co. LEND.O and New Century Financial Corp. NEWC.PK, as investors feared that the subprime lenders, which make loans to people with poor credit histories, would run out of cash.

Concern the crisis could spread to more mainstream lenders and worsen the U.S. housing slowdown rippled through other financial markets, pushing the Dow Jones industrial average .DJI down 243 points, or 2 percent.

"This is now becoming a liquidity crisis" in the mortgage sector, said Angelo Mozilo, the chief executive of Countrywide Financial Corp. CFC.N, the largest mortgage lender.

"It's going to get uglier," especially if investors continue to punish healthier lenders, as well as weak ones, Mozilo added. He spoke on CNBC television.

Tuesday's decliners included shares of major Wall Street banks, commercial lenders and thrifts that have exposure to mortgages, including Countrywide, Bear Stearns Cos. BSC.N JPMorgan Chase & Co. (JPM.N) and Washington Mutual Inc. WM.N

Accredited, one of the largest independent subprime lenders, said it needed to raise money after paying $190 million that lenders demanded. San Diego-based Accredited also said it is cutting an unspecified number of jobs and exploring "strategic options," including raising new capital.

Trading in shares of New Century, the largest independent subprime lender, was suspended by the New York Stock Exchange prior to delisting, and the company received a grand jury subpoena in a federal criminal probe.

On Monday, Irvine, California-based New Century had said it lacked enough cash to repay its own lenders.

Data released on Tuesday showed late payments on U.S. mortgages at a 3-1/2 year high, feeding investor worries that lenders might restructure or seek bankruptcy protection.

Lenders have been battered by rising defaults and demands from their own lenders to take back soured loans at a loss.

"There's not going to be many independent subprime lenders left," said Blake Howells, director of research at Becker Capital Management in Portland, Oregon.

More than two dozen subprime lenders have quit the industry in the last year. Many analysts say New Century is on the brink of bankruptcy.

Accredited spokesman Rick Howe did not return a call seeking comment. New Century spokeswoman Laura Oberhelman declined to comment.

Accredited skidded $7.43, or 65.2 percent, to $3.97, its lowest close ever. New Century, now listed on the Pink Sheets, fell 81.5 cents, or 49.1 percent, to 84.5 cents.

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