It’s always a mystery how the economy swings from easy credit—when lenders are filling the airwaves with loan ads—to the good old credit crunch when you can’t get a loan if your life depended on it.
But maybe the story of New Century Financial Corp. gives us a clue.
Reuters’ reporter Jonathan Stempel tells today how New Century can’t sell its paper to the government-sponsored mortgage giants any more.
New Century said it decided voluntarily on Monday to stop selling or being the main servicer of loans for Freddie Mac, the second-largest U.S. home loan financier. Fannie Mae (NYSE:FNM - News), the largest financier, cut off its own ties with New Century earlier this month, saying the company breached some contracts.
Hum. Just when poor folks are going to need credit the government decides to cut the cord. Or at least the quasi-monopoly government-sponsored politically-connected mortgage-bond floaters cut the cord. Or pull in their horns.
Just to be on the safe side.
It ain’t fair.
But does it mean a credit crunch, or at least a continuing slide in the housing market?
The simple answer is that we don’t know. We’ll know in about another year as we look back. Pundits will knowing say either:
- You could have seen that coming, or
- Well, those perma-bears were wrong again.
But right now, you can place your bets. There is still time.
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