The 2007 subprime lender collapse

Some filed for bankruptcy. Some were shut down by their corporate parents. Some were ordered out of the business by regulators. Almost twenty years later, people still search for these company names — usually because they are researching the financial crisis, or because they once had a loan with one of them and need to find out where it went.

This page explains what happened to each company, in plain language, and points to the places where old loan records are actually held. It is a reference page. Nothing on it is an offer of credit.

How six lenders failed in sixteen months

The failures were not independent events. They followed one mechanism. These companies did not hold most of the loans they made. They originated mortgages, bundled them, and sold them to investors as securities. That model works only while the loans perform and while short-term credit stays available to fund the next batch.

Both conditions broke at once in early 2007. Borrowers began missing their very first payments — the industry calls these early payment defaults — and contracts obliged the originator to buy those loans back. Buying back defective loans consumed cash. When the Wall Street banks providing warehouse credit saw the repurchase demands mounting, they cut the funding lines. Without funding, an originator cannot make the next loan, and a company whose only product is the next loan has nothing left.

The Federal Reserve later recorded that at least 169 independent mortgage companies which had reported lending data in 2006 ceased operations during 2007. Six of the larger ones are described below.

New Century Financial Corporation — Irvine, California

Founded in 1995 by three former Option One managers, New Century went public in 1997 and converted to a real estate investment trust in 2004. By 2006 it was the second-largest issuer of subprime mortgages in the country, behind only HSBC Finance, and had originated roughly $76 billion in high-interest loans across 2005 to 2007.

The end came in eight weeks. On 7 February 2007 the company announced it would restate its earnings for the first three quarters of 2006; the stock fell 36 percent in a day. On 2 March it said its annual report would be late. It stopped accepting loan applications on 8 March, was delisted by the New York Stock Exchange on 13 March, and filed for Chapter 11 bankruptcy protection on 2 April 2007, with about 7,200 employees. An examiner appointed by the bankruptcy court later described a brazen fixation on increasing loan volume without regard to the risks the strategy carried. The billing and collections unit was sold to Carrington Capital Management for $188 million. In 2010, three former officers agreed to pay $90 million in settlements and were barred from serving as directors of public companies for five years.

American Home Mortgage Investment Corporation — Melville, New York

American Home was a different animal from the others here. Founded in 1987 and structured as a REIT, it was the tenth-largest retail mortgage lender in the United States, and its book leaned toward Alt-A rather than deep subprime — borrowers with decent credit but light documentation. In 2006 it reported just over $1 billion in revenue and employed more than 7,400 people.

It made no difference. In late July 2007 its lenders demanded their money back. The company disclosed it could not fund roughly $800 million in loans it had already committed to, laid off close to 90 percent of its workforce within days, and filed for Chapter 11 in Delaware on 6 August 2007. Its servicing operation had been run out of Irving, Texas.

The servicing was sold on and changed hands four times over the following five years. If you are trying to trace a loan originated by this company, that chain is set out in full on our detailed page: what happened to American Home Mortgage.

Fremont General Corporation — Santa Monica, California

Fremont traces back to 1937 as Investors Thrift & Loan. Acquired by Fremont General in 1990 and renamed Fremont Investment & Loan in 1993, it grew from consumer lending into one of the larger subprime lenders in the western states, with roughly $62 billion in high-interest originations during the peak years.

Fremont is the one that regulators stopped rather than the market. In March 2007 the FDIC ordered the bank to cease subprime lending, finding it was making loans in a manner that substantially increased the likelihood of borrower default or loss to the bank. The company sold the servicing rights on its remaining $12.2 billion loan portfolio to Litton Loan Servicing in June 2008, filed for Chapter 11 on 18 June 2008, and sold its 22 branches and $5.2 billion in deposits to CapitalSource that July. It emerged from bankruptcy in June 2010 under a new name, Signature Group Holdings.

EMC Mortgage Corporation — Irving, Texas

EMC was a servicer rather than a retail lender: the unit inside Bear Stearns that collected payments on mortgages the bank had bought. At its peak it handled roughly 475,000 loans.

In September 2008, Bear Stearns and EMC agreed to pay $28 million to settle Federal Trade Commission charges over their servicing and collection practices. The FTC alleged the companies misstated what borrowers owed, charged unauthorised late, property inspection and loan modification fees, and pursued collections unlawfully — conduct the agency said breached four separate federal statutes. Around 86,000 consumers were mailed redress cheques in 2009. That programme is long closed. JPMorgan Chase acquired Bear Stearns effective 30 May 2008 and absorbed EMC; the alleged conduct predated that acquisition.

BNC Mortgage — Irvine, California

BNC was Lehman Brothers’ subprime origination arm, responsible for something near $48 billion in high-interest loans. Lehman announced its closure on 22 August 2007, citing market conditions, and shut 23 offices affecting about 1,200 employees. Lehman continued originating through its Aurora Loan Services platform for a while longer. Lehman Brothers itself filed for bankruptcy thirteen months later.

WMC Mortgage — Woodland Hills, California

WMC, also traded as WMC Direct, began in 1955 as Pacific Western Mortgage and later operated as Weyerhaeuser Mortgage. Private equity ownership moved it into subprime in the late 1990s, and GE Money bought it for around $500 million in 2004. It was the seventh-largest subprime originator in 2005 and fifth in 2006, with close to $50 billion in originations. WMC’s chief executive was among the lenders called before the Senate Banking Committee in March 2007. General Electric closed the business later that year.

Sold on the eve of the collapse: Aames Home Loan

Aames Financial Corporation of Los Angeles was one of the oldest names in subprime — by its own account a fifty-year-old mortgage banking company, headquartered at 350 South Grand Avenue and lending in 47 states under the consumer brand Aames Home Loan. The operating entity that actually appears on loan documents is Aames Funding Corporation, d/b/a Aames Home Loan; in its final years the publicly traded parent was Aames Investment Corporation (NYSE: AIC). At its late peak the company ran roughly 76 retail branches and three wholesale centers, and originated about $5.2 billion in loans in 2005.

Aames never made it to the 2007 collapse as an independent company — it was sold just ahead of it. On 25 May 2006, Accredited Home Lenders Holding Co. of San Diego (NASDAQ: LEND) agreed to acquire Aames, and the merger became effective 1 October 2006. The branches were folded into Accredited and the Aames name was retired, months before the subprime market turned.

Its buyer then lived the collapse for it. Accredited stopped originating new loans in August 2007, was sold in a renegotiated fire-sale to Lone Star Funds in October 2007, and filed for Chapter 11 on 1 May 2009 in the United States Bankruptcy Court for the District of Delaware (case 09-11516), where its assets were liquidated. The paper trail, however, outlived them both: deeds and assignments recorded across two decades name Aames Funding Corporation d/b/a Aames Home Loan, and successor captions — “Accredited Home Lenders, Inc., successor by merger to Aames Funding Corporation” — still surface in court filings and title searches to this day. If you are tracing an old Aames loan or lien release, the steps in the records section below are the way in.

Looking for records on a loan from one of these lenders?

Start from this fact: a lender going bankrupt does not cancel a mortgage. The loan was an asset, and assets get sold. If you borrowed from any company on this page, your loan was almost certainly transferred to another servicer — often more than once. Someone holds those records. It is not us, and we have no way to look them up on your behalf.

Where we have traced a specific lender’s servicing chain, the detail is on that lender’s own page — see American Home Mortgage for a worked example. Otherwise, here is where people usually find what they need.

• Your credit report. If the loan is still open, the current servicer is named on it. Federal law entitles you to reports at no cost from the three nationwide bureaus through AnnualCreditReport.com. This is the fastest route and it costs nothing.
• The MERS Servicer Identification System. Most loans from this era were registered with MERS. Its public lookup returns the current servicer for a registered loan.
• Your county recorder or clerk of court. Mortgages, assignments, and satisfactions are recorded against the property. The chain of assignments shows who the loan was transferred to and when. If the loan was paid off, the recorded satisfaction or release is the document proving it. Most Florida counties allow searching official records online at no charge.
• Bankruptcy court filings. The Chapter 11 dockets for these companies are public records, accessible through the federal PACER system. Fremont General’s case, for example, was heard in the Central District of California. Claims registers and asset sale orders show which buyer acquired which portfolio.
• The CFPB. If your issue is with the company servicing the loan today — a disputed balance, a payoff they will not produce, an error on your credit file — the Consumer Financial Protection Bureau accepts complaints and requires servicers to respond.
• A consumer attorney. If the matter involves a foreclosure, a title defect, or a disputed payoff, this is legal territory. We are a mortgage brokerage and cannot advise on it.

What actually changed in mortgage lending afterwards

It is worth being clear about this, because the loans described above could not legally be made today in the form they took.

The SAFE Act of 2008 created the licensing regime that produced the NMLS numbers you now see on every mortgage advertisement, including ours. Anyone originating a residential mortgage must be individually licensed, tested, background-checked, and publicly searchable at NMLSConsumerAccess.org. In 2007 that was not true.

The Dodd-Frank Act followed in 2010, and with it the Ability-to-Repay rule, effective 2014. A lender must now make a reasonable, good-faith determination that the borrower can actually repay, verified against documented income and assets. The stated-income loan — the instrument at the centre of most of these failures — is effectively gone from the consumer market. Qualified Mortgage standards cap points and fees and bar the negative-amortisation and interest-only structures that made early payment defaults so common.

Loan originator compensation rules removed the incentive that did much of the damage: originators can no longer be paid more for putting a borrower into a higher-rate loan. And since 2015, the TRID disclosure rules have required a standardised Loan Estimate within three business days of application and a Closing Disclosure three days before closing, so the terms are visible before signing rather than at the table.

None of this makes bad loans impossible. It does mean the specific machinery that broke in 2007 has been dismantled, and that a borrower today can verify, before applying, that the person advising them is licensed and accountable.

About this page

MortgageQuote.com is the trading name of New Century Financial Mortgage, LLC, a Florida mortgage brokerage founded in 2020. We publish this reference because the history is genuinely useful, because we hold domain names once used by these companies and would rather visitors find facts than a marketing page, and because the naming coincidence with New Century Financial Corporation deserves an unambiguous public answer rather than silence.

Sources

• Federal Reserve History — Subprime Mortgage Crisis
• Federal Trade Commission — Bear Stearns and EMC Mortgage to pay $28 million, September 2008, and the 2009 consumer redress announcement
• U.S. Securities and Exchange Commission, EDGAR — Fremont General Corporation Form 8-K, 2008
• U.S. Bankruptcy Court, Central District of California — Fremont General Corporation, case 8:08-bk-13421
• Lehman Brothers — press release announcing the closure of BNC Mortgage, 22 August 2007
• U.S. Securities and Exchange Commission, EDGAR — Accredited Home Lenders press release announcing the Aames acquisition, 25 May 2006, and the October 2006 stockholder-approval exhibit
• U.S. Bankruptcy Court, District of Delaware — Accredited Home Lenders Holding Co., case 09-11516
• Center for Public Integrity — The Subprime 25, including profiles of New Century Financial and Fremont Investment & Loan

Written by the licensed team at New Century Financial Mortgage, LLC — NMLS #1967971. Reviewed August 2026.

This article is provided for general informational and historical purposes. It is not legal, financial, or tax advice, and it is not a commitment to lend or an offer of any specific rate or term. Descriptions of companies, regulatory actions, and legal proceedings are drawn from the public records listed above.