Comments on: Scratch and Dent Loan Market Takes a Bad Beating

By: Morgan Brown

Morgan Brown — Fri, 20 Jul 2007 16:16:38 +0000

Thanks JAG for the kind words.

By: Morgan Brown

Morgan Brown — Fri, 20 Jul 2007 16:15:43 +0000

S&D Loan Trader – I think everything out there needs to be taken with a grain of salt. From the main stream media not knowing what they are talking about, to the NAR shills that have revised their forecasts down every month this year, to Bernanke saying subprime problems are contained, to blogs like this. They all require scrutiny and independent thinking.

This piece, while it is a marketing piece, speaks not only to scratch and dent loans (where Nautilis plays)but also standard loan pools out for sale with institutional investors. (Read it again – its in there.) Regardless of the source the fact of the matter is any bulk-selling small correspondent is going to see a ton of fade on any of its loan pools – especially those made up with subprime ARMs. And it is likely that bids that were extended were revised over the last two days. It’s been going on with flow-based loans and brokered loans as well.

Keith – Blogs are no more guilty than the main stream media that are reporting, mostly incorrectly, on this phenomenon. But the fact remains that correspondent pipelines are under pressure and that scratch-and-dent paper is fading fast in terms of pricing on the market.

Nautilis is a small broker – but they sell to Franklin Credit which is a big player; so their position is similar to others in that market space.

By: Keith Gregory

Keith Gregory — Fri, 20 Jul 2007 15:36:52 +0000

So this is a marketing piece sent out by Nautilis Capital telling their prospects to take whatever bid Nautilis has? This is extremely self serving and hardly informative or objective.

This is the problem with the blogs and the internet- anyone can post anything and seem like they know something.

By: JAG

JAG — Fri, 20 Jul 2007 14:57:38 +0000

Hi, Thanks for keeping your mortgage blog updated every day. I read it every day as part of my morning news and find your industry very intriguing. On another note, I will be sure to use you once I do decide to buy a house. (which might be awhile)

By: S&D Loan Trader

S&D Loan Trader — Fri, 20 Jul 2007 13:35:17 +0000

This article really needs to be taken with a grain of salt. Nautilus Capital is a small time loan broker (in the secondary market) and first and foremost, this article is a marketing piece. (I get it because I’m on their distribution list).

Basically, they are trying to motivate their clients to come to market with a portfolio of loans to sell. Nothing wrong with that; in fact that’s a good business strategy, but there’s no news here.

Some critiques:
Prices already changed. The market took its biggest whack back in February and March when the buyers finally remembered that credit mattered (this had been absent for more than 5 years).

Generally speaking, loan portfolio values change with rates change, just like bonds. Rates up=prices down, and vice versa. ARMs are somewhat insulated from this, except for the obvious concern that if an ARM resets up that the borrower would default, but assuming good credit low LTV, that’s not an issue.

Scratch and dent loans trade based on dozens of minute details embedded in the portfolio. The most important details are LTV and loan performance. If the LTV declines due to property depreciation, the price goes down. That’s discovered during due diligence…and that’s the way it’s been for years (nothing new here). It’s just that values are now dropping instead of “always” going up.

I could go on but I think that’s enough to get the point: first and foremost, this is a marketing piece.

By: Morgan Brown

Morgan Brown — Fri, 20 Jul 2007 02:53:58 +0000

Thanks for the encouragement Kit – it’s much appreciated.

By: Kit Mueller

Kit Mueller — Thu, 19 Jul 2007 23:32:46 +0000

Great post on an excellent site. Keep up the great work! An educated public is a better served one.

Cheers,
- Kit

By: Good to Go Pile . . . « Trading for the Masses

Good to Go Pile . . . « Trading for the Masses — Thu, 19 Jul 2007 21:30:05 +0000

[...] Scratch and Dent Loan market takes a beating!! [...]

By: Morgan Brown

Morgan Brown — Thu, 19 Jul 2007 17:40:50 +0000

Thanks Tike – I agree completely with your assessment.

By: Tike

Tike — Thu, 19 Jul 2007 06:16:30 +0000

Great info, keep up the good work, the secondary market is this housing market. Where it goes, so goes housing.