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Financial Services, Banking Article, Handling Subprime-mortgage opportunities
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Surviving—and prevailing—in the US subprime-mortgage market

  • The ills of the US subprime-mortgage market in early 2007 have been well documented. Less well understood, however, is the way industry players should respond to growing consolidation, continued vertical integration, and the threat of increased government regulation.
  • While not for the fainthearted, opportunities in the subprime-mortgage market should reward those willing and able to wait for an upturn. The winners will be banks that take this opportunity to review their channel-management strategies, improve their risk-management and pricing capabilities, widen the focus of product innovation, and fill technology and process gaps.
This article contains the following exhibits:
  • Exhibit 1: Nearly half of the companies in the subprime industry are exiting the market, are for sale, or are being acquired by other institutions.
  • Exhibit 2: The demand for affordable housing remains unmet for nearly two-thirds of low- to moderate-income households in the United States.
  • Exhibit 3: Recent moves by the leading broker-dealers to build or acquire captive originators are bringing asset management, loan origination, securitization, and structuring of collateralized debt obligation under one roof.
  • Sidebar Exhibit: Asset-backed security CDOs (collateralized debt obligations) are increasingly focused on residential subprime collateral.

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