Merrill Lynch gets cold feet: Unless you've been living under a rock, by far the biggest news of the week came in the form of an acknowledgement from the nation's third-largest originator, New Century Financial Corporation, that it had not only failed to properly account for the impact of loan repurchases on its financial statements throughout 2006, but had also grossly misestimated the volume of repurchases it would be faced with.
It's pretty clear at this point that at least one investment firm is tightening the screws on subprime credit. That firm? Merrill Lynch, recently stung by bankruptcies at both Ownit and MLN USA, who were both funded through agreements with the Wall Street giant.
Competing industry publication National Mortgage News first broke the story on Merrill's recent margin calls, and although Merrill did not provide New Century with a large warehouse line, it's clear that loan buybacks are becoming a growing problem for any subprime lender regardless of which Wall Street operation is providing the funding.