People's Choice Files for Bankruptcy

Subprime lender People's Choice Financial Corp. and affiliates -- which had hoped to go public one day -- filed for bankruptcy protection late Monday, leaving behind as unsecured creditors several banks and Wall Street warehouse lenders.In total, warehouse providers -- including GMAC-RFC and Merrill Lynch -- are owed close to $100 million, all of it unsecured. The Irvine, Calif.-based wholesaler could not be reached for comment. Its chief executive is Neil Kornsweit, a former top executive at Aames Financial. In its March 19 issue, National Mortgage News broke the news that People's Choice was in financial trouble. According to court documents relating to People's Choice and affiliates, its warehouse-related unsecured creditors include: GMAC-RFC ($17.4 million owed), EMC Mortgage ($15.3 million), Merrill Lynch ($14.6 million), and Washington Mutual ($14.2 million), among others. EMC is owned by Bear Stearns. Subprime lender Option One Mortgage of Irvine, a competitor, is owed $361,327 and is listed as both a landlord and "trade vendor." Sources told MortgageWire that People's Choice, which had not funded a loan in two weeks, is in the process of closing offices and letting workers go. The company, a privately held real estate investment trust, ranked among the top 40 subprime lenders in the United States, according to the Quarterly Data Report.