Local subprimers on life support

They must be close to pulling the plug at Irvine-based New Century, while Fremont General's condition is extremely critical. It's not hard to figure out why: The mortgage business relies on those monthly payments to keep coming in and when they don't - or Wall Street folks bankrolling those loans fear they won't - the bottom can fall out of a company pretty fast. So it is at New Century, whose stock lost nearly 70 percent of its value today after word that the company was under criminal investigation. Shares are down 87 percent this year - and with investors pulling back on loans or protecting their exposure, New Century might not stay in business much longer. Of course, things were wild and crazy while they lasted. From the NYT:

For Kal Elsayed, a former executive at New Century Financial, a large lender based in Irvine, driving a red convertible Ferrari to work at a company that provided home loans to people with low incomes and weak credit might have appeared ostentatious, he now acknowledges. But, he says, that was nothing compared with the private jets that executives at other companies had. “You just lost touch with reality after a while because that’s just how people were living,” said Mr. Elsayed, 42, who spent nine years at New Century before leaving to start his own mortgage firm in 2005. “We made so much money you couldn’t believe it. And you didn’t have to do anything. You just had to show up.”

Meanwhile, Santa Monica-based Fremont, the second-largest independent U.S. mortgage lender, has put many of its residential mortgage employees on paid leave. Late Friday, Fremont agreed to a cease-and-desist order with the Federal Deposit Insurance Corp. that requires the company to stop making lots of subprime loans (Fremont says it's getting out of the subprime business). Its stock fell more than 32 percent today. From Bloomberg:

At the company's four-story building in a office-and-retail park in Anaheim, California, workers this morning loaded their cars with copier-paper boxes filled with the contents of their desks. Some were dressed in T-shirts and jeans, having been told about the layoffs on Friday. "Great company to work for,'' said Sean Rones, 41, an account executive who was putting supplies including a laminated Fremont loan rate sheet into his sport-utility vehicle. "Good company, strong work ethic, and they looked after their people. And we made good money. And it's a shame that the Feds are on a witch hunt against us.''

It'll be a while before we know exactly how who did what and when. It is worth noting that there are plenty of subprime lenders in solid financial condition. Thing is, no one seems willing to distinguish between the good ones and the bad ones. Not today anyway. Everyone is just running for the hills. Marketbeat's David Gaffen notes that a number of analysts downgraded New Century and wonders what took them so long. "This seems to us like telling someone to buy an insurance policy after the car has gone off a cliff, or after the vehicle, in addition to careening into a ravine, has also burst into flames," he writes.