Greene became a billionaire by buying credit default swaps on subprime mortgage-backed bonds as housing crashed.
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He later became a billionaire by buying credit default swaps on subprime mortgage-backed bonds as housing crashed.
Traders have been closely watching the ABX indexes, which indicate prices for credit-default swaps linked to subprime bonds.
Not surprisingly, given their weaker credit histories and financial conditions, subprime borrowers default on their loans more frequently than prime borrowers.
Since then, about 1 in 4 of the nearly 200 plaintiffs has declared bankruptcy, about the same rate as subprime mortgage default.
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Many traders follow an index of credit default swaps that tracks values of subprime debt.
Professor Cathy Lesser Mansfield of Drake University Law School has studied default and foreclosure rates in the subprime mortgage industry.
John Taylor, president of the National Community Reinvestment Coalition, wants Congress to take additional action to help subprime borrowers who are currently in default.
Some loan pools already have seen default rates exceeding 40%, a big reason many subprime bonds trade at a fraction of their face value, and their holders won't recover their full principal balance, despite the recent rally.
The patchy credit histories of subprime and low-documentation borrowers made it hard to model default rates accurately.
The default rate for CAP borrowers was only a quarter what it was for subprime mortgage holders, even though the incomes and backgrounds of borrowers were similar.
Many subprime loans have ended up as pieces of CDOs, and as default rates soar the damage may well spill over into the CDO market.
What happened when you started to see all the wolves in the subprime market and you started to see so many people going into default is that the credit market has tightened up.
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