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Subprime Mortgage Collapse |
Subprime Mortgage Collapse - Subprime mortgage crisis
In March 2007, the United States' sub-prime mortgage industry collapsed due to higher-than-expected home foreclosure rates, with more than 25 sub-prime lenders declaring bankruptcy, announcing significant losses, or putting themselves up for sale.
The stock of the country's largest sub-prime lender, New Century Financial, plunged 84% amid Justice Department investigations, before ultimately filing for Chapter 11 bankruptcy on April 2, 2007 with liabilities exceeding $100 million.
The manager of the world's largest bond fund, PIMCO, warned in June 2007 that the sub-prime mortgage crisis was not an isolated event and would eventually take a toll on the economy and ultimately have an impact in the form of impaired home prices. Bill Gross, a "most reputable financial guru", sarcastically and ominously criticized the credit ratings of the mortgage-based CDOs now facing collapse:
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