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Here We Go Again: Demand For Subprime Debt Is "Out Of Control"
As Kyle Bass once eloquently noted, the brevity of financial memory is about two years; and nowhere is that more clear than in the explosive resurgence of demand for new subprime-mortgage-backed products. As Scotsman Guide reports, some subprime lenders are reporting strong investor appetite for the once-reviled mortgage products (for borrowers with credit scores as low as 500 and with debt-to-income (DTI) ratios as high as 50 percent). "It's out of control; it seems like there’s 10 times the amount of demand to buy this paper as there are borrowers that want the loans," said one lender. As Bass may have also said "proceed with caution."
Although a number of people still cringe at the term subprime, some subprime lenders are reporting strong investor appetite for the once-reviled mortgage products.
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Investors are interested in recent subprime loans for their better returns than traditional mortgages.
Depending on the risk of the borrower, these mortgages carry interest rates between 5 percent and 9 percent. Hutchens said that all types of investors are after the Angel Oak subprime products, from hedge funds to large mortgage lenders — “anyone who’s looking to participate in the mortgage business at higher coupons besides agency modes.”
The reach for yield - and ignorance of risk - but this time it's different...
Angel Oak Mortgage Solutions offers a “non-prime" product on a wholesale basis for borrowers with credit scores as low as 500 and with debt-to-income (DTI) ratios as high as 50 percent, while the company's “recent housing event” product offers similar terms for borrowers one day out from a short sale or foreclosure. Borrowers, however, are required to put down at least 20 percent.
“This is the new subprime,” Angel Oak Senior Vice President of Sales and Marketing Tom Hutchens told Scotsman Guide News. “Everyone has preconceived notions about what subprime means. This really resembles how subprime first began — [the borrowers] have equity in the transactions, and fully documented incomes.”
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Athas Capital Group Inc., one of the first companies to reenter the subprime space several years ago, is keeping almost all its mortgages on the books, stopping to sell about 10 percent to 20 percent of production to investors per year. Athas CEO Brian O’Shaughnessy calls the products “sane subprime.”
There were investors asking about Athas subprime products from the beginning, O’Shaughnessy said, but lately investors have been seeking subprime with fervor.
“It’s out of control; it seems like there’s 10 times the amount of demand to buy this paper as there are borrowers that want the loans,” O’Shaughnessy told Scotsman Guide News. “There is a line outside the door to buy our paper.”
One reason, O’Shaughnessy said, is because Athas has has had no defaults and has no current 30-, 60- or 90-day late payments on its subprime loans (there was one 60-day late payment last year, but that borrower caught up, O’Shaughnessy said). Typical borrowers, he said, come to Athas because they can close on a mortgage quickly. The average credit score is 702 on its subprime products, even though Athas goes as low as 550.
“Probably the biggest reason [borrowers] come to us is alternative proof of ability to repay, or if they have a past foreclosure or bankruptcy that’s too recent for a bank to consider,” he said.
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"The people investing in this understand that these are well thought out mortgages for people who can actually pay," Perl told Scotsman Guide News. "We're having no problem selling it."
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“We’ve known since 2008 that it’s not the subprime borrower that went away, it’s the product availability,” Hutchens said. “I think we’re going to continue to grow. It’s hard for us to say which year it’s going to hit and at what level, but we know it’s going to be significant.”
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Now, what happened the last time that investor demand for a product massively outweighed the supply that lenders could provide? That could never happen again, right?
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Wow just wow
Kyle Bass? Pfft. What does Lance Bass have to say?
Listen.
Kyle already respectfully asked the previous Hedge owners "NOT" to profile him.
Get it?!
Listen.
We lined up for a "shitty deal" and all we got was shit!
Listen.
It's the "NEW" deal. Keep working for your American dream. Keep your head up even if your house and car and student debt is "WAY" under water. Work, Americans, W-O-R-K!
Listen.
Work is outdated and stupid. Stay home and trade Bitcoins...
Listen.
Well there is that. I've taken up trading "CHOICE" Americans.
Rothschilds have an online exchange where we trade American futures contracts. It's basically an over/under of each American (with a Social Security number) lifetime earnings. We bet on their productivity or lack thereof.
So far I've made a little over $100,000 usd's.
This time when it all collapses there is no ChiCom or EU bailout of the US. WE are totally f'd on our own.
Athas CEO Brian O’Shaughnessy calls the products “sane subprime.”
Come on, this is from the Onion right?
Principal Oh Shag Hennessy?
http://www.youtube.com/watch?v=Dd7FixvoKBw
Is sane subprime like military inteligence?
Not to worry, the supply of sub-prime leaders, bankers and politicians has never been greater.
Chasing yield. Zero interest rates will do that.
Rinse and repeat. TBTF grand bailout #2.
The Banksters -
Bail ins will save them this time
DTI 50...i'm ipressed
2008-2009 try number 2
Kissinger recently said we need a new world order. Could it be we also need a new economic model ?
The financial conduct here is quite improper.
It's not just the financial memory, basically all of US memory, political, historical, etc, is two years.
I've got some pocket lint a rusty nail and a piece of string if anyone is looking for a AAA investment opportunity.
If it can it fog a mirror, its triple A.
Pass a bailout-able bundle my way....
Sorry but the string is strictly bail-in.
Has Santelli weighed in on this yet?
Ten (10) times the demand for this paper Rick..
The demand for deadbeats to keep the money churn going, Rick, will never ebb.....
"alternative proof of ability to repay", yeah hookers and blow dealers
Q: Why do dogs lick themselves?
A: Because they can.
Subprime = market assisted suicide = zero sum game
[press start] Rinse & Repeat Cycle
I really don't see a problem. Housing prices have recovered nicely and will never go down again. Nobody defaults on a mortgage when there's equity in the house. 2014 is the new 2004. We're gonna skip right over 2007-2012 this time. Everyone will have a 1m house and 1m in a 401k. La la la la la la.
Obama’s new EO Amnesty will jump start the housing market. Wait until their new minimum wage status is not granted and house payments fall into arrears. There goes the neighborhood.
What's a better democrat plan than to upturn a peaceful community, then ask for more taxpayers money to combat new crime threats.
I honestly believe, Democrats will handle things on their own. When a party starts engaging into developing a crime setting environment, all bets are off for their continued future support.
Volkswagen is back at it again. Sign and drive away like you stole it, to dampen the excessive inventory. Stupid fucks at every aspect in channel stuffing a market. In America, you can nearly get up to a $10,000 rebate off a listed NSA tracking car price. P/E will have a better than expected quarterly earning result.
NAR is no different. Inflated housing prices, pinching up property taxes to cover pension funds and new wage increases within the municipalities. The 47+ million on Government EBT has lit up the new housing market.
/LOL
Enlighten me:
""a listed NSA tracking car""??
I don't live in North America, what does that mean?
I would guess that it is a new car with all mod cons, and it has several computers and wifi hotspots in the car, and that the car is connected to cellular and wifi and internet networks and thus it can be track foot by foot?
www.onstar.com
. . . is an example. One benefit is that if the vehicle airbags deploy, emergency responders are immediately notified of the crash and are given your exact location. Another is that if you're locked out of your car, just call and they'll unlock the doors.
But the police can--and have--compelled Onstar to disclose location data. Onstar has also been compelled to keep the microphone active so the cops can record everything.
"a listed NSA tracking car"
Subprime car buyers have a GPS device secretly intalled by the dealer. This way, if the buyer misses two payments, the car is automatically disabled and the repo goons have no problem finding it.
Humans don't learn, the risk gene is more powerful than the reason gene, look at casinos, fewer than 7 years and we put our hand back into the fire.
Oh well.
The first goal in achieving financial security is to take steps that insure capital preservation. One thing has become crystal clear over the last few decades and that is the economic landscape is constantly changing this means we really are no safer today than in the past. One day you can be a hero and the next day a goat.
One of my largest reasons for concern is I feel that many of the numbers being presented to us do not make rational sense, the "numbers don't work." The article below delves into how all of us will be vulnerable if the current financial system breaks down and has to be rebooted or restarted under new or drastically different set of rules.
http://brucewilds.blogspot.com/2014/11/capital-preservation-is-job-one.html
All the result of the failure of society to hang these people (the issuers, not the borrowers).
Everybody wants to own a house but a lot of consumers just don’t have money for that. Of course applying for a mortgage is a solution. But is it good that now people with low credit scores and high DTI will be eligible for home loans? Should we expect the next housing bubble? It seems that Obama doesn’t learn from mistakes of past. All people who out take mortgages now will use cash loans after to pay to mortgage companies. I understand that people with low credit scores also need an opportunity for buying a house but on the other hand, such opportunities can harm their credit even more and get them into the debt burden.