Subprime Mortgage Loans Are Back, With A New Name (XLF)

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April 16, 2018 7:09am NYSE:XLF

From DollarCollapse.com: Record student loan balances? Check. Trillion dollar credit card debt? Check. Six tech stocks dominating the Nasdaq? Check. Subprime auto loans at record levels? Check.


All that’s missing is subprime mortgages and we’d have every bubble base covered. Oh wait, those are back too, just under a different name:

Subprime mortgages make a comeback–with a new name and soaring demand

They were blamed for the biggest financial disaster in a century. Subprime mortgages – home loans to borrowers with sketchy credit who put little to no skin in the game. Following the epic housing crash, they disappeared, due to strong, new regulation, and zero demand from investors who were badly burned. Barely a decade later, they’re coming back with a new name — nonprime — and, so far, some new standards.

California-based Carrington Mortgage Services, a midsized lender, just announced an expansion into the space, offering loans to borrowers, “with less-than-perfect credit.” Carrington will originate and service the loans, but it will also securitize them for sale to investors.

 

So today’s subprime mortgages are being written with lots of common sense safeguards. But demand for the resulting bonds is soaring and lots of new players, big and small, are getting into the game. Wonder what that means for underwriting standards going forward.


The Financial Select Sector SPDR Fund (XLF) rose $0.22 (+0.80%) in premarket trading Monday. Year-to-date, XLF has declined -1.61%, versus a -0.64% rise in the benchmark S&P 500 index during the same period.

XLF currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 37 ETFs in the Financial Equities ETFs category.


This article is brought to you courtesy of DollarCollapse.com.


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