Subprime Lender Looks Cheap!!!

[RollingRockMike]

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Theoretically they are off the hook for those potential mortgages after securitizing, but I'm not sure it's true (the wall street journal hinted today that some of the securitizers have been forced to cough up additional monies when ABS's have extra losses).


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I must have read the same article. I found it interesting so I asked my parents, who are both in the secondary mortgage business. They said that the contracts have clauses to require loan buybacks in the case of applicants lying (i.e. fraud, which many of these are). They said there are a few other common clauses, but they are basically all due to the fault of the loan originator.

Hence, if one insists on entering this market, maybe you can do some research as to the strength of the validity checking of their underwriters, etc. I don't know why anyone would enter such a risky industry with your hard earned dollars, but this might be a good place to hedge by buying a few you like and shorting a few you don't.

Mike