updated 3/8/2007 5:56:39 PM ET 2007-03-08T22:56:39

Subprime lender New Century Financial Corp. on Thursday halted all new loan applications as it struggled to obtain financing amid market speculation that a bankruptcy filing was possible.

In a Securities and Exchange Commission filing, New Century said it was only able to fund some of its loans this week, and its capacity to fund new loans has been “substantially limited” due to problems obtaining financing from lenders.

Aside from deteriorating credit quality, the nation’s second largest subprime lender faces investor lawsuits and an investigation by federal prosecutors.

New Century said Thursday it is in “discussions with lenders and other third parties regarding a refinancing and other alternatives to obtain additional liquidity,” adding that “no assurance can be given that any of these discussions will be successful.”

A New Century director, David Einhorn, resigned from the company’s board Wednesday night. Einhorn is a principal at hedge fund Greenlight Capital LLC, which owns more than 6 percent of New Century’s stock.

The Irvine, Calif.-based company has become the poster child for the problems of the subprime mortgage industry, which lends money to people with bad credit. Amid a slowdown in housing markets nationwide, the subprime industry has come under the microscope in the past month.

Shares of New Century plummeted $1.29, or 25 percent, to close at a 52-week low of $3.87 in Thursday’s trading on the New York Stock Exchange.

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