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April 03, 2007

Major Sub-Prime Lender Goes Bankrupt Economy

Pop goes the housing credit bubble. BBC:

New Century Financial, one of the largest sub-prime lenders in the US, has filed for Chapter 11 bankruptcy.

New Century sought protection from creditors after it was forced by its backers to repurchase billions of dollars worth of bad loans.

The company said it would immediately cut 3,200 jobs, more than half of its workforce, as a result of the move.

Sub-prime lenders, who target customers with poor credit histories, have suffered from a downturn in the market. [...]

Leading US economists warned on Monday that the current tide of defaults in the sub-prime mortgage sector would continue to weigh on the US's slowing housing market.

"We suspect the problem in the sub-prime area is just the tip of the iceberg for the mortgage market as a whole," said senior economist David Shulman, in the University of California's quarterly Anderson Report.

"For all practical purposes, the sub-prime market is in the process of shutting down." [Emphasis added]

The "tip of the iceberg." Stay tuned.

Posted by Jonathan at April 3, 2007 04:02 PM  del.icio.us digg NewsVine Reddit YahooMyWeb