Market math:

Market math: "Coupons on non-QM loans are so high that there’s a lot of spread, which reduces your risk," Angel Oak CIO Sreeni Prabhu says.

Why Subprime Mortgages Lend Themselves to Securitization

By Allison Bisbey

Many lenders are still reluctant to give mortgages to borrowers with less-than-pristine credit, yet such loans are far more likely than prime jumbo loans to be bundled into collateral bonds. Sreeni Prabhu of Angel Oak Capital credits banks' behavior and higher interest rates for that reality.


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Latest News

Ocwen Agrees to $900K Settlement with Washington State

– Ocwen Financial Corp.'s loan servicing subsidiary has reached a settlement with the Washington State Department of Financial Institutions' consumer services division over the servicer's practice of using unlicensed offshore companies.

Ygrene Energy Hires 2 Finance Execs as it Prepare to Tap ABS

– Ilan Gleiser joins as chief risk officer, Giancarlo Gennaro joins as senior director of finance, and Rasool E. Alizadeh joins as director of capital markets and asset-backed securities.

Fitch: Subprime Auto ABS Losses Leap to 7.39%

– The weaker collateral pools in recent-vintage subprime auto loan pools are leading to rising delinquencies and portfolio losses, with July's annualized net losses climbing 17% month-over-month, and 28% year-over-year.

NorthStar Preps $90M Private Student Loan Securitization

– The collateral is high quality and highly seasoned; however there is a risk that some of the loans to borrowers studying for the bar or in medical residency could be discharged in bankruptcy, according.

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Featured Articles

Risk Retention May Give Big Banks the Edge in CMBS

– The first commercial mortgage-backed security to comply with "skin in the game" requirements was extremely well received. Market participants credit the way the large banks sponsoring the deal retained the risk – a strategy unavailable to nonbank lenders.

What Mortgage Insurer Merger Means for Lenders

– Arch U.S. MI's acquisition of United Guaranty Corp. will make one of the smallest private mortgage insurers the sector's new market leader. While the move is likely to ease pricing competition among the six remaining players, it's not expected to set off a wave of further consolidation.

"Skin in Game" Rule a Boon for New Breed of CLO Manager

– Rules requiring CLO managers to keep skin in the game of their deals has taken a toll on smaller firms. But the resulting thinning of the ranks has created room for some new players that are better capitalized, including insurance companies.

Banks are Keeping Their Own Skin in This CMBS

– Wells Fargo, Bank of America, and Morgan Stanley could have satisfied regulators by selling the riskiest slice of the commercial mortgage securitization to a designated third party; instead they are collectively holding on to 5% of each tranche of securities issued in the $870.6 million deal.

FHA, Lenders Clash Over Financing Greener Homes

– The Federal Housing Administration is promoting a particular kind of financing for residential energy retrofits that another regulator staunchly opposes. Mortgage lenders and investors have qualms, too, about the impact on their standing in collateral claims.

Why Credit Card Losses Are Poised to Rise

– The unusually strong loan performance in the credit card business lasted longer than many observers expected. But today the industry's prolonged post-crisis era finally appears to be over.

Strategy to Woo New CLO Investors Starts to Pay Off

– Since 2013, CLO Managers have been issuing notes with rates that are initially low, but step up after 18 to 24 months, betting that they can refinance them more cheaply; so far their success has been mixed.

Private Student Loans Get an A for Credit, C for Growth

– Banks that stuck with student lending after the financial crisis are finding the business far less risky than it used to be.

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Current Issue

States Joining Ranks of Student Loan Cherry Pickers

State student loan authorities sense a business opportunity helping graduates who are gainfully employed lower their payments. Their low-cost funding could put them in competition with banks and marketplace lenders.

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