But within the sub-prime mortgage industry itself, some analysts see an ongoing meltdown.
"Too Much Easy Money"
"We're just seeing the downside of too much easy money being given to too many borrowers who probably shouldn't have gotten loans in the first place," Moneyandmarkets.com real estate analyst Mike Analyst told CNBC.
Shares New Century Financial, the No. 2 U.S. subprime
mortgage lender, registered their biggest decline in nearly 8-1/2 years, falling more than 27%.
After the bell on Wednesday, New Century forecast an unexpected fourth-quarter loss. But HSBC's warning further undercut the confidence of investors, further pummeling the stock and those of its peers.
Shares of Countrywide Financial, the fourth-largest sub-prime lender, slid Thursday. Accredited Home Lenders Holding , another sub-prime mortgage specialist, dropped as well.
Some investors are betting that sub-prime mortgage shares have hit a trough, speculating that Thursday's hits may mark the final reckoning for company missteps and other factors that are now in the past. Sub-prime lenders are eating bad loans they made last year and the year before, said Pisani, who also noted that lending standards were tightened in 2006.
"A lot of people are starting to look at these stocks--they've been beaten down--and pick at them a little bit," Pisani said.
Overcoming Bad Debt
While acknowledging the scope of sub-prime lenders' troubles, Promontary Financial Group partner Elizabeth McCaul said the firms will overcome their bad debt woes if they focus more on qualitative analysis and become less reliant on mathematical models.