A new Impact Alert from Aite Group, LLC looks at the current woes in the subprime mortgage market and suggests possible scenarios that may follow.
Though it is too soon to tell how all these issues will play out, Aite Group believes that lenders only marginally committed to the subprime loan market could well decide to leave the market altogether because the risk/reward equation will be seriously altered.
Pressure from all sides will lead to tighter mortgage underwriting, particularly in the subprime market. Lenders will continue to exit the market, but those that remain will rethink their approaches to regain the confidence of consumers, regulators, and investors.
The Aite Group says opportunities will arise for lenders committed to the subprime market, particularly those that can get beyond “by the numbers” underwriting.
“There is little debate that mortgage industry practices have created ill effects for lenders, consumers and the economy as a whole,” says Eva Weber, Aite Group analyst and author of the Impact Alert. “The question now is when the fallout from these practices will dissipate. The unfortunate answer is that things may still get worse before they get better.”