November 26, 2007 / 10:53 PM / 11 years ago

CORRECTED - Fieldstone Mortgage in Chapter 11 bankruptcy

(Corrects fifth paragraph to reflect actual amount of assets shown in bankruptcy filing)

NEW YORK, Nov 26 (Reuters) - A subprime home loan provider acquired in July by a joint venture of mortgage insurers MGIC Investment Corp (MTG.N) and Radian Group Inc (RDN.N) has filed for bankruptcy protection.

Fieldstone Mortgage Co, which said it made $5.5 billion of loans last year, filed for Chapter 11 protection from creditors on Friday with the U.S. bankruptcy court in Baltimore, court papers show.

The Columbia, Maryland-based company joined more than a dozen mortgage lenders to file for bankruptcy protection this year as defaults soar and credit conditions tighten.

“Due to the wide-ranging economic downturn in the credit markets, and the severe financial pressures facing the debtor, the debtor was unsuccessful in its efforts to resolve its liquidity crisis outside the bankruptcy forum,” lawyers for the company wrote.

Fieldstone said it had more than $100 million of liabilities and between $1 million and $100 million of assets, court papers show.

Fieldstone listed several big financial companies among its largest unsecured creditors, saying it owed $38.5 million to Morgan Stanley (MS.N), $23.3 million to a unit of HSBC Holdings PLC (HSBA.L), $15.3 million to Bear Stearns Cos BSC.N and $10.4 million to Countrywide Financial Corp. CFC.N

The company is seeking permission to obtain up to $3.8 million of debtor-in-possession financing to keep operating while in bankruptcy.

Fieldstone’s former parent, Fieldstone Investment Corp., was acquired this year by Credit-Based Asset Servicing and Securitization LLC, better known as C-BASS. MGIC and Radian created C-BASS to invest in subprime mortgages, which go to people with poor credit.

In February, MGIC and Radian had themselves agreed to a $5 billion merger, but terminated their agreement on Sept. 5 after their shares dropped and they decided to write off much of their $1.03 billion investment in C-BASS.

The U.S. Securities and Exchange Commission has requested information about the MGIC-Radian merger and C-BASS, and MGIC said C-BASS itself may need to seek bankruptcy protection. (Reporting by Jonathan Stempel; Editing by Gary Hill and Andre Grenon)

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