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Mortgage brokers play a pivotal role in the subprime lending process, originating nearly three-quarters of all subprime loans and nearly 70% of Alt-A mortgage loans.
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As the rain pours down on the City, the markets have caught a summer cold.
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The much-publicized problems in subprime mortgages are threatening to put a serious drag on the entire economy.
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Over recent years, hedge funds have widened the spectrum of their activities from hedging and trading on the derivatives and currency markets to building huge positions in credit markets by selling protection on credit derivatives, providing equity to the collateralized debt obligation market and investing in mezzanine tranches of subprime residential mortgage-backed securities.
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Structured finance transactions, such as term securitizations, involve a variety of market participants, ranging from relatively small lenders and servicers to large financial institutions.
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The second part of this Learning Curve covers quantitative modelling techniques and the assessment of model risk for constant proportion debt obligations. -
Constant proportion debt obligations have gained a lot of attention in the structured credit market since their debut last summer.
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Over the last several years, a number of lenders have entered the specialized lender segment, focusing on subprime mortgages in the U.K.
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In a market marked by strong credit performance and growing originations, it was accepted that 50 basis points was an adequate and profitable servicing fee.
