NCC (NCC) was one of those banks that decided the mortgage business was simply an outstanding way to make money. The price of homes and commercial buildings would rise at 10% per annum forever, It was a sure fire way to mint money.
None of that worked out, so NCC is raising over $6 billion from a group lead by private equity firm Corsair Capital LLC. The price of the shares they will buy is well below market. According to The Wall Street Journal "The plan calls for the investors to pay about $5 a share." The stock closed at over $8 on Friday and has a 52-week high of over $38. Stockholders don’t have much left.
The reason NCC has done so badly is not much different from the troubles at Washington Mutual (WM). It is a first cousin of the mortgage-backed paper problems at Citigroup (C) and other large banks and brokerages. Simply stated real estate will always rise and mortgages, no matter what the interest rate, will not fail to pay out.
The greatest fallacy of most banking is that there is no such thing as a bad loan.
Douglas A. McIntyre