Sub-prime lenders send jitters through global markets
{{date|March 13, 2007}}
[[Image:Nyse050205.jpg|thumb|The New York Stock Exchange. {{Image source|[http://www.flickr.com/photos/wengs/184542007/ WalkingGeek]}}]]
Just two weeks after [[China]] sent global markets into a tumble, growing worries about sub-prime mortgage lenders in the [[United States]] are sending jitters through stock exchanges around the globe. The three major US stock market indices each fell two percent from Monday's closing price, marking the second-biggest loss of 2007. London's {{w|FTSE 100 Index|FTSE 100}}, Paris' {{w|CAC 40}} and Frankfurt's {{w|DAX|DAX 30}} indices each closed down more than 1 percent.

As the {{w|Mortgage Bankers Association}} reported that late payments on mortgages and home foreclosures in the US homes rose in the fourth quarter to their highest level in years, investors are concerned that not only US banks but also multi-national banks around the globe could have exposure.

More than two dozen sub-prime lenders have closed or sold operations as defaults on those mortgages have risen. "The delinquencies and defaults have started to soar," said Nicolas Retsinas, director of Housing Studies at [[Harvard University]]. "A lot of these lenders started to make loans and lost track of some of the fundamentals." 

{{w|New Century Financial|New Century Financial Corporation}}, the second largest sub-prime lender in the US, has recently revealed that its creditors were no longer providing funds and, further, it has become subject of an [[US Securities and Exchange Commission|SEC]] investigation. The {{w|New York Stock Exchange}} has said it will delist New Century. {{w|Accredited Home Loan Lending}}, another major sub-prime mortgage specialist, said it was seeking fresh capital and waivers on its lending covenants.

Sub-prime lenders provide mortgages to people who do not qualify for loans from mainstream lenders, typically due to their credit histories. The lenders then bundle these mortgages as {{w|collateral (finance)|collateral}} for loans that they obtain from other financing firms, such as {{w|General Motors Acceptance Corporation|GMAC}}. Such firms can then repackage these loans and sell them as {{w|mortgage-backed security|mortgage-backed securities}}. These securities may end up in the hands of major {{w|multinational corporation|multi-national}} banks such as {{w|Citibank}}, {{w|HSBC}}, and {{w|Commerzbank}}. Each level of lending assumes a level of financial risk, but trouble can arise when the risk tolerances are exceeded. If too many homeowners default on their mortgages, the sub-prime lender can end up defaulting. If too many of these lenders default, as it is feared may be happening now, the defaults can cascade upward. While no one is predicting major bank failures at this point, it is feared that their profits could be hurt.

==Related news==
*{{Wikinews|title=U.S. stocks plummet amid global sell-off|date=February 27, 2007}}

==Sources==
*{{source|url=http://news.bbc.co.uk/1/hi/business/6446049.stm
|title=US probes sub-prime mortgage firm
|author=
|pub=BBC News Online
|date=March 13, 2007}}
*{{source|url=http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-03-13T170704Z_01_N13464426_RTRIDST_0_MARKETS-STOCKS-UPDATE-9.XML
|title=Subprime loan woes trigger stocks' slide
|author=Caroline Valetkevitch
|pub=Reuters
|date=March 13, 2007}}
*{{source|url=http://www.bloomberg.com/apps/news?pid=20601087&sid=aBuN.6w4H7K8&refer=home
|title=U.S. Subprime Mortgage Delinquencies at 4-Year High
|author=Sharon L. Crenson and Kathleen M. Howley
|pub=Bloomberg L.P.
|date=March 13, 2007}}
*{{source|url=http://www.forbes.com/feeds/ap/2007/03/13/ap3512011.html
|title=New Century Subpoenaed, Faces Delisting
|author=Associated Press
|pub=Forbes
|date=March 13, 2007}}
*{{source|url=http://www.cnbc.com/id/17584953
|title=Stocks Plummet On Subprime Woes; Dow Plunges 242 Points
|author=
|pub=CNBC
|date=March 13, 2007}}
*{{source|url=http://www.cnbc.com/id/17595067
|title=Accredited, New Century Lead Subprime Meltdown
|author=Reuters
|pub=CNBC
|date=March 13, 2007}}
*{{source|url=http://www.ft.com/cms/s/b0547428-d191-11db-b921-000b5df10621.html
|title=Markets slide as subprime woes escalate
|author=Michael Mackenzie and Saskia Scholtes
|pub=Financial Times
|date=March 13, 2007}}

{{publish}}
{{archived}}

[[Category:North America]]
[[Category:United States]]
[[Category:Europe]]
[[Category:Germany]]
[[Category:Frankfurt am Main]]
[[Category:Asia]]
[[Category:Economy and business]]
[[Category:Stock market]]
[[Category:2008 financial crisis]]
[[Category:US Securities and Exchange Commission]]
[[Category:HSBC]]
The New York Stock Exchange. 
Just two weeks after China sent global markets into a tumble, growing worries about sub-prime mortgage lenders in the United States are sending jitters through stock exchanges around the globe. The three major US stock market indices each fell two percent from Monday's closing price, marking the second-biggest loss of 2007. London's FTSE 100, Paris' DAX|DAX 30 indices each closed down more than 1 percent.

As the  reported that late payments on mortgages and home foreclosures in the US homes rose in the fourth quarter to their highest level in years, investors are concerned that not only US banks but also multi-national banks around the globe could have exposure.

More than two dozen sub-prime lenders have closed or sold operations as defaults on those mortgages have risen. "The delinquencies and defaults have started to soar," said Nicolas Retsinas, director of Housing Studies at Harvard University. "A lot of these lenders started to make loans and lost track of some of the fundamentals." 

New Century Financial Corporation, the second largest sub-prime lender in the US, has recently revealed that its creditors were no longer providing funds and, further, it has become subject of an SEC investigation. The Accredited Home Loan Lending, another major sub-prime mortgage specialist, said it was seeking fresh capital and waivers on its lending covenants.

Sub-prime lenders provide mortgages to people who do not qualify for loans from mainstream lenders, typically due to their credit histories. The lenders then bundle these mortgages as collateral for loans that they obtain from other financing firms, such as GMAC. Such firms can then repackage these loans and sell them as mortgage-backed securities. These securities may end up in the hands of major multi-national banks such as HSBC, and . Each level of lending assumes a level of financial risk, but trouble can arise when the risk tolerances are exceeded. If too many homeowners default on their mortgages, the sub-prime lender can end up defaulting. If too many of these lenders default, as it is feared may be happening now, the defaults can cascade upward. While no one is predicting major bank failures at this point, it is feared that their profits could be hurt.
North America United States Europe Germany Frankfurt am Main Asia Economy and business Stock market 2008 financial crisis US Securities and Exchange Commission HSBC