Irvine, Calif.-based subprime lender Option One Mortgage will no longer fund 100 percent loans, reflecting a broader change in the subprime market towards stricter underwriting standards. Housing Wire obtained a copy of a letter from Option One president Steve Nadon, sent to brokers yesterday, which said the company will no longer accept loan submissions for loans above 95 percent combined loan-to-value (CLTV). Option One officials confirmed the move to HW on Thursday afternoon, noting its decision applies to both subprime and Alt-A loan programs and that it expects no layoffs as a result of the changes. The lender, affiliated with tax services provider H&R Block (NYSE:HRB), has been on the auction block for some time, with company officials stating in a recent earnings call that they expect to announce a deal to sell the subprime mortgage operation sometime before the end of March. In the letter, Nadon pointed to an increase in loan submissions as a result of many of the company's competitors running into funding problems. "We are getting a lot of 80/20s and 100% CLTV deals that used to go to our competitors," the letter said. "While there is nothing inherently wrong with those types of loans from a pure credit standpoint, right now they have a fundamental flaw that we simply cannot overcome. That is the almost complete lack of appetite for the product by the bond market...To originate a loan product that no investor, in todayÂ´s market, wants to buy is irresponsible." More New Century rumors emerge Nadon also referenced to the problems at New Century Financial (NYSE:NEW) and Fremont General (NYSE:FMT). "I sincerely hope New Century survives their current situation," the letter said. "Both of those companies [New Century, Fremont] over the years have been managed well, are good competitors, and staffed by a lot of very good people. The impact of the current nonprime market environment on the families represented by the employees of those companies is significant and we should all be as empathetic and supportive as we can be to their situation." While soaring loan submissions at Option One were behind the company's move to eliminate all 100 percent fundings, rumors also surfaced late yesterday that at least one large subprime lender was having difficulty funding any loans at all. Numerous sources, including independent brokers attempting to fund loans, have suggested to HW that New Century might be running into funding difficulties and is "backing up" a pipeline of unfunded loans due to a lack of available warehouse credit. New Century had warned about possible operating difficulties associated with its short-term credit facilities in an SEC filing late last week. Company officials at New Century Financial could not be reached for comment on the latest rumors, however, leaving it unclear what operating difficulties -- if any -- are currently facing the subprime mortgage operation. Option One far from alone Option One isn't the only lender that will exit at least a portion of the subprime lending business. Sources confirmed to HW this morning that Wachovia (NYSE:WB) has shuttered its correspondent lending program; competing mortgage publication MortgageDaily.com was first to report on the story yesterday. Rumors are also swirling today that Wells Fargo (NYSE:WFC) is likely to shut down its B/C lending platform, although any such move has not been confirmed by bank officials. Housing Wire first reported on the rumors on March 3; Wells officials wouldn't comment at that time, citing company policy, but said that the company remains committed to providing affordable housing options to its customers. Washington Mutual (NYSE:WM) has also allegedly quit funding all subprime loans, according to an email notifying brokers of the the alleged shutdown of subprime wholesale operations at Charlotte, NC-based Ameritrust Mortgage Company. "Due to market conditions, our warehouse provider, Washington Mutual, ceased funding for subprime loans," said the email. "This has left Ameritrust with no alternative to fund subprime loans." Calls to Ameritrust and Washington Mutual officials for confirmation of the company's shift in credit policy were not returned by HW's press deadline on Thursday. While many rumors of a shift in credit policy remain unconfirmed, a few large mortgage banking operations have confirmed a shift in underwriting criteria for subprime loans, with Merrill Lynch's First Franklin eliminating some subprime lending programs on March 1 and Freddie Mac announcing new criteria for subprime fundings on February 27. Full disclosure: The author owns no securities associated with any of the companies mentioned in this story. Housing Wire will always disclose the financial interests of its authors.