Anyone could own a home. It was a promising feature of the subprime mortgage that made millions of Americans first-time homeowners during the early half of the 2000s. Lenders extended adjustable-rate mortgages to borrowers who had previously been denied the opportunity to own a home for several reasons, including bad credit histories. When these mortgages reset to higher interest rates, mortgage delinquencies soared and millions of Americans lost their new homes to foreclosure. In the end, the same promise that increased home ownership helped lead to the collapse of the U.S. housing market and a financial meltdown that rippled across international markets between 2007 and 2010. According to LoansSafe.org, the top five subprime lenders financed 46.1 percent of all homes in 2007. By 2010, that number had grown to 63 percent -- an increase of 36.6 percent. MarketWatch.com ranked the following financial institutions as the top five subprime mortgage lenders of 2007.
Based in Illinois and owned by the HSBC Group, HSBC Finance originated roughly $12.3 billion in subprime mortgages during the fourth quarter of 2006, according to MarketWatch.com. In 2009, the mortgage giant officially exited the subprime mortgage market, writing off an estimated $34 billion in U.S. subprime loan assets, according to The Boston Globe.
New Century Financial
The second-biggest subprime mortgage lender in the U.S., California-based New Century Financial reported $12.2 billion in subprime mortgage originations during the fourth quarter of 2006, according to the MarketWatch rankings. Financial woes, federal investigations and criminal allegations forced New Century to file for bankruptcy in April 2007.
Based in California, Countrywide Financial financed an estimated $10.1 billion in subprime mortgage originations during the fourth quarter of 2006, making it the third largest subprime mortgage lender, according to MarketWatch. Bank of America bought the company in 2008 amid federal investigations into allegations of fraudulent lending practices and securities fraud.
A subsidiary of General Electric, WMC Mortgage became the the fourth largest originator in 2007, issuing $9 billion in subprime mortgage loans, according to MarketWatch. WMC folded in 2007 as a result of the subprime mortgage crisis.
First Franklin Financial Corp.
MarketWatch ranked California-based First Franklin Financial as the fifth largest subprime mortgage lender in 2007 for issuing an estimated $7.8 billion in subprime mortgage loans. Owned by Merrill Lynch, First Franklin ducked out of the subprime mortgage market in 2008. It now operates as Home Loan Services Inc., and focuses on mortgage collection.
- MarketWatch.com: "Top 10 subprime originators lean to left coast"; Laura Mandaro; March 2007
- "Federal Reserve Bank of St. Louis Review"; The Evolution of the Subprime Mortgage Market; Souphala Chomsisengphet, et al.; February 2006
- "The Boston Globe"; HSBC ends US subprime lending; Bloomberg News; March 2009
- "Los Angeles Times"; SEC sues 3 former officers of Irvine subprime lender New Century Financial; E. Scott Reckard; December 2009
- LoanSafe.Org: "Top 10 Mortgage Lenders"; Moe Bedard
- David Sacks/Lifesize/Getty Images