New Century Feels Crunch

Updated from 4:52 p.m.

New Century (NEW) got $265 million in financing, calming rabid speculation on Wall Street that a bankruptcy filing was imminent.

But the Irvine, Calif., lender to homebuyers with poor credit histories said in a regulatory filing it had stopped accepting loan applications as its banks clamp down on the company's borrowing. New Century said it "has only been able to fund a portion of its loans this week," and "its capacity to fund new originations is substantially limited due to its lenders' restrictions or refusals" to extend credit.

Players in the mortgage industry expressed little suprise at the development.

"Our title agents have been getting indication that there have been dry closings," says Paul Lamparillo, CEO of Nationwide Mortgage Corp. "It's a clear indication of a company much impeded by cash flow. It's a clear indication that there's a problem."

"We've been hearing about delays [in loan funding] from New Century, and we've been warning our agents," adds Richard Gelfond, underwriting counsel at Fidelity National Title Insurance Company for New Jersey.

New Century said the new financing will be secured by New Century's REIT mortgage loan portfolio and certain residual assets. It will use the proceeds to refinance existing obligations.

New Century shares plunged 25% in furious trading Thursday amid rumors that the company was preparing a Chapter 11 filing. New Century shares have lost more than 80% of their value this year as delinquencies and defaults have risen in the so-called subprime mortgage sector.

New Century has not returned calls seeking comment.

After falling $1.29 in regular trading Thursday to $3.87, shares added 2 cents in after-hours action.