Dominos starting to fall? New Century, a major subprime mortgage lender files bankruptcy.

[tjwash]

Article is here.

New Century was the latest subprime lender to fall on hard times amid a spike in mortgage defaults caused by borrowers unable to make payments.

More than two dozen subprime lenders have shut down in recent monthsm, and others are scrambling to stay in business.

Subprime loans target borrowers with low credit scores. The mortgages carry relatively high interest rates but can also offer low initial payments.

“New Century’s failure raises the very real risk that the problems facing the subprime sector will spread into the broader mortgage market,” said Octavio Marenzi, CEO of Celent, a Boston-based financial research and consulting firm.

“Relatively lax lending standards were by no means limited to subprime lenders, and problems could easily spread to the broader banking sector,” he said

New Century said it had agreed to sell its loan servicing business to Carrington Capital Management LLC and its affiliate for about $139 million, subject to the approval of the bankruptcy court.

CIT Group and Greenwich Capital Financial Products Inc. have agreed to provide up to $150 million in working capital to facilitate the reorganization process, the company said.

If all the predatory lenders like this one start to fall, this will make the S&L bailout of a half a trillion dollars under Bush Sr. look like chicken feed.

[oldtime dfl_er]

1. meanwhile

families are homeless and destitute. Screw these big lenders, at least they CAN file for bankruptcy.

[Iwasthere]

2. Wait! They aren't going to bail them all out are they?

[HiFructosePronSyrup]

3. Isn't the whole point of predatory lenders...

that they shut down rapidly because they're fly-by-night operations?

Or am I confusing them with something else?

[On the Road]

4. Predatory Lenders are Supposed to Stay in Businesss

Just like the credit card companies charging 25% interest. They just got overaggressive. Reporting inflated income has become very common. And when people start losing their income and defaulting, the mortgage company has a problem, especially if the houses are no longer worth what they paid.

[tjwash]

5. Reporting overinflated income was really screwing them up.

You are supposed to report only your base salary, without overtime to qualify, yet a lot of people were allowed to "project" how much overtime they may work in the year to bump that figure up. They were also able to add bonuses that they had not received yet to bump it up as well.

It's one of those "seemed like a good idea at the time" things.

[BeatleBoot]

6. Couple this with the Auto Industry Bankruptcies and you get...

a BUSH DEPRESSION.

I have seriously considered drastic financial moves ahead of the upcoming collapse.

This is the scariest I've seen it in my lifetime.