Well, it is no surprise that another financial institution is getting out of the subprime home lending business. The latest news comes from Lehman Brothers, a leader in packaging subprime mortgages into securities.
Of course, by shutting down this arm of their business, they are also laying off employees. The subprime shake up isn't done yet…
“Lehman Brothers announced today that market conditions have necessitated a substantial reduction in its resources and capacity in the subprime space,” the firm said in a news release.
Lehman’s decision to shutter the lending unit, BNC Mortgage, makes it the latest casualty in the subprime mortgage meltdown that started earlier this year and rippled into the broader credit markets starting in late July.
In recent weeks, several mortgage companies that specialized in risky home loans have stopped making loans, shut down or encountered other distress. Also today, Accredited Home Lenders, a subprime lender based in San Diego, stopped making loans through brokers and laid off 1,600 people, more than half of its staff. Earlier this month, Lone Star Funds, a private equity firm, pulled out of a deal to buy the company for $400 million.
On Monday, Capital One Financial shut down its GreenPoint mortgage business, which specialized in making loans to people who did not fully document their income and assets. And Aegis Mortgage, which is controlled by Cerberus, the private equity giant, filed for bankruptcy protection, last week.
If you would like to learn more, visit The New York Times article:
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