Another subprime lender is seeking bankruptcy protection from its creditors, as the house of cards built on risky mortgages continues to collapse. People's Choice Home Loan Inc., has asked a bankruptcy court in Santa Ana, California, to give it time to reorganize.
The Irvine-based lender is the fourth subprime mortgage company to file for bankruptcy protection since December. It joins the ranks of Ownit Mortgage Solutions, Mortgage Lenders Network and ResMae Mortgage.
At the same time, other subprime lenders, such as New Century Financial, Fremont General and NovaStar Financial, have suffered heavy losses in the last 12 months.
People's Choice and its subsidiaries report about $100 million in both assets and liabities. Creditors include mainline banks and brokerages houses Wachovia Bank NA, Bear Stearns Mortgage Capital and Merrill Lynch Mortgage Lending.
Last week People's Choice pulled a registration statement it had filed with securities regulators, a sign that its snowballing financial problems had reached critical mass. The Online publication National Mortage News quotes sources as saying the company is talking to a potential investor about a sale.
Subprime lenders make loans to consumers whose credit is not good enough to get a so-called "prime" loan.
While that can be helpful, many subprime lenders developed increasingly exotic mortgages, encouraging consumers to purchase more house than they could actually afford. As a result, many homeowners -- many of whom made no down payments -- are now defaulting on their loans.
