New Century, Biggest Subprime Casualty, Goes Bankrupt
April 2nd, 2007Via: Bloomberg:
New Century Financial Corp., overwhelmed by rising defaults from borrowers with poor credit records, became the largest subprime mortgage lender ever to fail as it filed for bankruptcy today.
New Century plans to sell most of its assets within 45 days, said the Chapter 11 filing in federal court in Wilmington, Delaware. About 3,200 people, more than half the workforce at the Irvine, California-based company, will be fired. New Century said it already agreed to sell its mortgage billing and collections unit to Carrington Capital Management LLC for $139 million.
The company rode the U.S. housing boom to become the largest independent mortgage lender to subprime borrowers, only to collapse as interest rates rose and home prices fell. New Century’s market value soared to more than $3.5 billion in December 2004, and last year it made about $60 billion in loans. Like rival firms, the company lowered its lending standards to keep business flowing after demand slumped.
“They’re clearly going to be the poster child for bad practices in the mortgage industry,” said Matthew Howlett, an analyst at Fox-Pitt Kelton in New York. “When all is said and done, the management team will be to blame.”
The court filing protects the company’s assets from creditors. They include many of the Wall Street firms that financed its mortgage loans, such as Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse Group.
Related: Money: Going Tactical
If the US Fed prints money to replace the liquidity lost when these loans default, like Zimbabwe President Robert Mogabe did in his country, the value of the money goes down, and precious metals go up.
The US and Zimbabwe dollar used to be fairly similar (we went their for our honeymoon 10 years ago) but now the price of gold in Zimbabwe is…six million Zim$ per ounce. 😉
Imagine if your gold coins were worth $6,000,000 US per ounce?
“Zimbabwe Miners Federation (ZMF) president George Kawonza, says “with the inflation rate standing at 1,729.9% we agreed that the gold price should
be pegged at around Zim$180,000 per gram”, which comes out to Zim$5,598,625.86 per ounce.”