Predicting the Next Subprime Blowout

September 4, 2007 No Comments »

subprime parents

The table above details the relationships between subprime lenders and their Wall Street parents.

If you were ever curious about how much subprime exposure the big guys have, wonder no longer.

So let’s analyze this list.

First Franklin was the most active subprime lender in 2006, owned by banking giant Merrill Lynch, who seems to be chugging along without incident.

The next lender on the list is the now defunct BNC Mortgage, which was very recently consolidated by Lehman Bros’ Aurora Loan Services.

They’re followed by EMC Mortgage, the child of Bear Stearns, who has been especially quiet despite originating the riskiest loans in the group.

One phrase: 100% financing option arm.

Next is First NLC, a mortgage lender owned by FBR, which laid off 645 employees or roughly 40% of staff early last month.

The next lender on the list is Morgan Stanley’s Saxon Mortgage, which already closed its correspondent unit and reported mortgage layoffs, with more rumored in the near future.

That’s followed by Credit Suisse’s LIME, a fresh addition picked up back in April of 2007 with no signs of stress reported.

Rounding out the list is Aurora Loan Services, who halted subprime lending in the fall of 2006.

So what does this list tell us anyways, aside from relationships, subprime loan origination, and subprime market share?

Well, most importantly, it will likely tell us who’s going to announce the next subprime blowout.

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