On February 7, 2007, the Senate Banking Committee heard testimony which indicated that nearly 20 percent of subprime mortgage loans obtained in the period from 2005-2006 will result in foreclosure, affecting over 2.2 million families in the United States over the next few years.  On Monday, April 2, 2007, the second largest provider of high-risk, subprime mortgages, New Century Capital Corporation of Irvine, California, filed for Chapter 11 Bankruptcy protection and fired 3200 employees in the wake of its own "financial missteps" and trouble with the SEC and U.S. Department of Justice over financial statements which failed to accurately account for financial losses the corporation was suffering, as well as mismanagement of the corporation.  With more than 25 subprime lending companies shutting down over the past few months , many are wondering about the implications for the future of both the subprime market and the economy.
Subprime mortgages are those given to consumers with credit scores below 620, indicating that these consumers are generally late in paying their bills and often have significant delinquencies in their credit reports indicating frequent late payments on obligations of 30 to 90 days.  Alternatively, subprime mortgages are issued to consumers with high debt-to-income ratios or with limited credit histories.  As compared to prime borrowers, "subprime borrowers are disproportionately minority and lower income, older, less well educated, less financially sophisticated, and less likely to search for the best interest rate."  This indicates that subprime mortgagees may not fully understand exactly what they are getting themselves into contractually and financially at the time they sign their mortgage documents. [More]