New Century Financial Conference Call

New Century Financial, which is a mortgage REIT and the second largest sub-prime lender after Ameriquest, held a conference call on Friday the 23rd following its announcement that results for the year would be weaker than originally expected. The company’s main business involves underwriting or originating residential mortgages and then selling them into the secondary mortgage market. The company enjoyed high origination volumes in the month of August and it looked like the third quarter would be relatively solid. However, the company said that prices for mortgages fell substantially in the secondary market in September, and as a result, its margins are expected to contract in the fourth quarter to between 30 and 50 basis points from earlier estimates of between 80 and 100 basis points. In other words, the price that New Century is able to sell mortgages at declined in the past few weeks. In turn, the company said that the lower prices reflect concerns by mortgage buyers (Asset Backed Bond Funds) that 1.) too much supply already exists. 2.) the quality of the newer mortgages might be less than ideal.

In order to try to improve its margins, New Century is going to increase the rate it charges borrowers. The company beleives that this could reduce loan volumes by 30% from the record high levels of August. For the housing market, this is not a good sign if you are a bull as the higher interest rates will undoubtedly cause prospective home buyers to reduce their bids to what is affordable.




A replay of the call will be available until this Friday. The replay number is (888) 286-8010 or (617) 801-6888 and the passcode is 13365441.