April 2, 2007 / 4:13 PM / 13 years ago

CHRONOLOGY-New Century and the subprime meltdown

NEW YORK, April 2 (Reuters) - U.S. mortgage lenders are suffering from rising default rates, and subprime lenders, which serve borrowers with poor credit histories, have been the hardest hit.

Here is a history of the subprime sector, beginning with the formation of subprime lender New Century Financial Corp. (NEW.N)NEWC.PK which filed for bankruptcy on Monday. ——————————————————————————————-

1995 - New Century is founded in Irvine, California by Edward Gotschall, Brad Morrice and Robert Cole, who as executives at prime mortgage lender Plaza Home Mortgage started up another subprime lender, Option One.

1996 - New Century makes its first loan. It closes the year with 35 offices, 333 associates and annual loan production volume of $357 million.

1997 - New Century raises $28.8 million in its first initial public offering.

1998 - Rising delinquencies and the aftermath of the Russian debt crisis spook investors in subprime, but U.S. Bancorp likes the business enough to strike a strategic alliance with New Century, buying $20 million of its preferred shares.

2000 - New Century’s annual loan production volume is at $4.2 billion.

2001 - New Century’s annual loan production volume is at $6.2 billion.

2002 - U.S. Bancorp sells its preferred shares in New Century after also selling off common stock it had previously bought in the bank. Loan production hits $14.2 billion.

2004 - New Century converts to real estate investment trust (REIT) structure, which sells shares in an initial public offering raising $783 million. Annual loan production hits $42.2 billion and the company employs 5,300 associates in 101 offices.

2005 - New Century ranks third on the Wall Street Journal “Top Guns” shareholder scoreboard list in the three-year average annual return category. Agrees to buy some assets of Royal Bank of Canada’s RBC Mortgage Co. Loan production hits $56.1 billion.

May, 2006 - Ameriquest Mortgage Co. fires one-third of its employees, raising fears that other firms including New Century could lay off personnel as a five-year housing boom cooled.

Feb. 7, 2007 - New Century says it will restate earnings for the first three quarters of 2006 and report a loss for the fourth quarter because of errors in accounting for losses on repurchased loans. Its shares fall 17 percent.

Europe’s biggest bank, HSBC Holdings (HSBA.L) says it will take a charge for bad debts of more than $10.5 billion for 2006 due to problems with its U.S. mortgage book.

Feb. 9 - Standard & Poor’s downgrades New Century to a “junk” rating.

Feb. 9 - Countrywide Financial Corp. CFC.N, a California home lender, says it reduced its lending to people with poor credit histories in January as foreclosures rose to their highest level since 2002.

Feb. 12 - Countrywide and New Century lead mortgage lenders in a sell-off as Moody’s Investors Service warns of further defaults.

Feb. 13 - Fremont General Corp. FMT.N, one of the largest providers of subprime loans, says it has stopped offering some second mortgages.

Feb. 27 - Fremont General delays its fourth quarter results and says it may not file by the March 1 deadline.

March 1 - New Century delays filing its annual report

March 2 - New Century fires 4.4 percent of its work force and says U.S. prosecutors are probing trading in its securities.

March 5 - New Century loses 60 percent of its value, leading a broad decline among the subprime lenders.

March 8 - David Einhorn, a principal at hedge fund Greenlight Capital, resigns from New Century’s board. The company stops taking new loan applications.

March 9 - General Electric Co.’s (GE.N) WMC mortgage unit, a major player in the subprime business, says it will lay off 20 percent of its work force.

March 12 - New Century says its lenders plan to halt financing, pushing the company close to bankruptcy. Standard & Poor’s cuts it to “default.”

March 13 - NYSE suspends New Century share trading. Shares shift to over-the-counter trading, where they tumble further.

April 2 - New Century files for Chapter 11 bankruptcy protection in Delaware bankruptcy court. (For more on the subprime mortgage crisis, see [ID:nN16195443])

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