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High-risk mortgage lender New Century filed for bankruptcy and fired over half its work force on Monday as signs emerged the U.S. housing crisis was spreading into better quality home loans.
Rising defaults on variable-rate mortgages have pinched lenders who made loans to borrowers with spotty credit histories, leaving many in financial trouble.
Until now, such issues had been mostly contained to subprime, the riskiest category of mortgages. But now lenders in a class of loans known as Alt-As, which sit in a gray area between risk and safety, are also ringing alarm bells.
"We are only at the very beginning of the problems facing subprime," said Brad Hintz, analyst at Sanford C. Bernstein. "This liquidity crisis is continuing in the marketplace.
New Century Financial Corp. said Monday it will immediately cut 3,200 jobs, or 54 percent of its work force, as part of its Chapter 11 bankruptcy reorganization.
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