In The News Today

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Bill Holter’s Commentary

A replay of 2008, only much bigger!

Subprime Mortgages: The Dog Returns To Its Vomit
May 11, 2018

Other people’s money is always more fun to play with recklessly than your own. As such there’s been a quiet escalation in number of private capital pools offering mortgage (and auto) financing to subprime quality borrowers. “Special Circumstance Lending” is one such lender in Denver. It constantly runs ads on Denver radio.

The proprietor of Special Circumstance Lending was an aggressive participant in the junk mortgage underwriting business and dumped more than his fair share of subprime crap into the Wall Street mortgage securitization scheme that led to “The Big Short.” SCL doesn’t need to see your tax returns. It will give you a mortgage based on bank account statements.

The big Wall Street banks appear to have retreated from risky mortgage lending. But have they? Though new regulations are intended to limit the amount risk the big banks take underwriting mortgages , the banks instead extend large lines of credit to private “non-bank” mortgage lenders, like Exeter Finance. The average credit score of Exeter underwritten paper is 570. If Exeter doesn’t get repaid, the big banks extending the funds to underwrite that garbage won’t get repaid.

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