Morgan Looks to Unload New Century Loans

Howlett says lenders like Morgan Stanley are "losing money every day" with these loans.

The lenders, he believes, are figuring that New Century isn't going to get the capital and "it's probably better now just to cut your losses than sort of working them out in a lengthy bankruptcy."

Several other troubled lenders have recently been bailed out.

Fremont General announced last week that it is selling $4 billion of loans. The Santa Monica, Calif., lender said it was exiting the subprime business in February.

Accredited scored a $200 million term loan commitment from hedge fund Farallon Capital Management of San Francisco. Accredited is selling $2.7 billion worth of loans held for sale to an unnamed buyer so it can meet margin calls.

Howlett said both Fremont and Accredited have "better quality" operations than New Century and don't share the same liquidity issues.

New Century also has been hit with multiple "cease and desist orders" from state regulators. It is under investigation led by the Securities and Exchange Commission and U.S. Attorney's office, and the New York Stock Exchange delisted the company for falling below listing requirements.

Most recently, Barclays has asked New Century to repurchase $900 million of mortgage loans.

A call to New Century wasn't immediately returned.