NEW, FMT and LEND pretty much bit the dust today. This subprime implosion is fascinating isn't it?

NEW stock plummets another 69%

FMT down another 33%

LEND off 26%

CFC off 5%

Does anyone else have some serious dot-com deja-vu today?

This meltdown won't stop with subprime and the lenders. Nope, that's not where it ends. That's where it BEGINS.

NEW YORK, March 5 (Reuters) - Shares of New Century Financial Inc. dropped 69 percent on Monday on fears it could go bankrupt as rising concerns about defaults triggered a broad sell-off in the mortgage-lending sector.

Subprime lenders, which make loans to people with poor credit histories, suffered the biggest declines.

But the meltdown also spread to Countrywide Financial Corp, the largest mortgage lender, whose shares fell on concern that even homeowners with good credit scores will miss more payments.

"We think there is further downside risk, possibly to $0," wrote Merrill Lynch & Co. analyst Kenneth Bruce. "Bankruptcy seems a likely course of action."

Many subprime lenders are being forced to buy back loans at a loss, and several have quit the business or have gone bankrupt in the last three months.

Ready for the other shoe? Subprime lender Fremont blows up, internal memo leaked?

Here's the news on Friday that sent the stock plummeting (again):

Fremont General Corporation to Exit Sub-Prime Residential Real Estate

Fremont General Corporation, a nationwide real estate lender doing business primarily through its wholly-owned industrial bank, Fremont Investment & Loan ("FIL"), today announced that it intends to exit its sub-prime residential real estate lending operations.

And here's the leaked internal email (may or may not be legit - we'll see tomorrow) that hit the internets tonight (note - I have no FMT position):

From: Brian Daily
Sent: Sun 3/4/2007 4:22 AM
To: *Tampa 2 Office; *Tampa 1 Office; *ResRe Tampa 1 AE
Subject: Fremont ceasing doing business.

Teams,It is with great regret that I must inform you that Fremont Investment and Loan will cease funding loans and doing business. At 12:35 (pst) Saturday, Fremont General received notice from the FDIC that they are not permitting any more loans to be funded by Fremont. In short, our funding available was terminated by the Federal Home bank.

The suddenness of the change and the shift from our communication literally less then 24 hours previously simply perplexes me. However, this simply validates the volatility on our business.

None of us in Hawaii realized or appreciated the gravity of the situation we were facing. There are many questions that many of you have. There is a conference call that will be conducted on Monday that will answer many of these questions that you will have.Jerry Casanova will be able to communicate with you more specifics on Monday morning. Please show up for work to receive these instructions.

I will be leaving the meeting here in Hawaii early and attempting to return to the office sometime on Monday.In order to assist our clients with some instructions-

Given the sheer size and significance of the unregulated credit derivative markets, this is the kind of stuff that capital market crashes are made of

From Doug Kass at thestreet.com comes this article on what's going on in the credit markets. Yes, 99% of people in America don't know, don't care and don't want to be bothered with all this financial mumbo jumbo CDO credit risk subprime blather...

But oh, how they will be bothered. How they wish they had paid attention.

The credit spigot is being turned off. No more cash-out refis. No more cash-back-at-close flips. No more Hummer H2s. No more trips to Greece. No more no-money-down-do-doc-interest-only loans. No more bidding wars on condos. And no more price appreciation on homes.

Damn this has all been prewritten, so there should be no surprises for HP'ers. It's like we have the playbook. And actually, we do.

The Next Shoe to Drop?

With the contagion that started in subprime mortgage lending now spreading to other mortgage tranches, as reported here, the next shoe to drop might well be in the broader securitization market.

Not only will older, less-protected packaged securitizations and other derivatives decline in price in a readjustment, but the entire credit securitization chain will become less profitable to industrial companies, mortgage lenders, banks and brokerages.

Consider what has occurred and is now occurring in subprime. The prices of mortgages are rising as the originations become less profitable for the financial intermediaries that serve the market. In turn, housing affordability worsens, delinquencies and foreclosures rise, housing inventories build further, and home prices drop in the second leg down for residential real estate.

This is the vicious cycle and contagion in credit markets.

Now I am hearing stories of plunging demand for CDO tranches and sponsors taking large fee-haircuts before deals can be sold. It is in the mixed asset class of CDOs where the contagion of subprime might soon spread as buyers recoil from sharper-than-anticipated losses in the mortgage market.

Credit spreads are flying open and the vicious cycle of credit has begun as the evaluation of risk is reassessed.

Given the sheer size and significance of the unregulated credit derivative markets, this is the kind of stuff that capital market crashes are made of.

Give us your top five housing crash short plays

Here's my five

Countrywide (CFC)

Accredited Home Lenders (LEND)

Fisrt Fed Financial (FED)
Fannie Mae (FNM)

Homebuilders Index (XHB)

Of course, shorting is a very dangerous game - you can lose everything, especially if you take out put options (which I prefer to shorting). But with the writing on the wall, ask yourself, if you're in the market, why not make money off of companies with bad business models or terrible future prospects? Why be long 100% of the time with the rest of the sheeple?

Note: I'm short CFC and LEND today