NEW YORK (Reuters) - Shares of National City Corp (NYSE:NCC - News) and Washington Mutual (NYSE:WM - News) plummeted more than 25 percent each, leading financial stocks lower on Monday amid fears about bank stability and the future of the mortgage market.
"The fear factor is in play right now," said Michael Nix, portfolio manager Greenwood Capital Associates.
Investors are particularly skittish about the health of the banking system after U.S. regulators swooped in to seize mortgage lender IndyMac Bancorp Inc (NYSE:IMB - News) on Friday in the third-largest banking failure in U.S. history.
"Investors are out there saying, if this happened to Indymac, why not NatCity?" said Matt McCormick, stock analyst at Bahl & Gaynor Investment Counsel in Cincinnati.
Kristen Baird Adams, a spokeswoman for National City, said, "Clearly there is a lot of market speculation broadly today. We are experiencing no unusual depositor or creditor activity."
The United States on Sunday offered to support Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News). The two major mortgage lenders' difficulties threaten to further hurt the already weak U.S. mortgage market.
Washington Mutual could face $26 billion in losses, with $21 billion from mortgages, a report from Lehman Brothers said on Monday. A Washington Mutual spokesman was not immediately available for comment.
Washington Mutual shares were off $1.45 to $3.50 while National City shares fell $1.15 to $3.27.
(Reporting by Dan Wilchins, Elinor Comlay, and Jonathan Stempel, editing by Mark Porter)