http://www.laborradio.org/node/5629Sub-Prime Collapse Is A Red Flag For Mortgage Market
A bankruptcy filing by one of the country’s largest sub-prime lenders has sent up a red flag in the larger mortgage market. Jesse Russell reports:
New Century Financial was the second largest provider of home loans to high-risk borrowers. On Monday the company filed for bankruptcy, immediately firing 3,200 workers and announcing plans to sell off major assets. Dozens of sub-prime lenders have collapsed in recent months on the heels of a hike in mortgage defaults, but New Century is the largest and the announcement is causing concerns in the industry as a whole. Historically it has been the sub prime market that acts as an early indicator for a market entering recession. Octavio Marenzi, of financial research and consulting firm Celent, told the Associated Press that “New Century’s failure raises a very real risk the problems facing the sub-prime sector will spread into the broader mortgage market.”