This certainly seems like bad news, especially sine people have been warning about this (kevin Drum in particular) sort of thing for quite a while:
American Home Mortgage Investment Corp. became the second-biggest residential lender to file for bankruptcy protection this year, adding to signs that late payments have spread to homeowners with good credit records.
The company sought federal court protection from creditors in Wilmington, Delaware, today, saying it had assets of more than $100 million and debts of more than $100 million owed to more than 100,000 creditors. The filing comes after the company announced Aug. 2 it would halt operations and slash staff.
American Home specialized in mortgages for people who fall just short of top credit scores. More than half a dozen competitors have declared bankruptcy this year as defaults spilled over from “subprime” borrowers with the worst repayment records to those with more reliable payment histories.
“Their sources of funding have all dried up,” said Mark T. Power, an attorney who is representing some creditors in the case. “This case is going to be very similar to New Century.”
New Century Financial Corp., based in Irvine, California, became the largest home lender to seek court protection from its creditors when it filed for bankruptcy in April. The company is now being liquidated. Melville, New York-based American Home also is probably going to be forced to liquidate, Power said in an interview Friday, after American Home told employees that it was planning to declare bankruptcy.
There are a number of you who have been following this issue far more closely than I am, and might be able to fill in the gaps. how bad is this/ Am I being chicken little? Is this just the market correcting itself? Or is this the sign of something catastrophic on the horizon?