Citigroup, Credit Suisse Re-Enter Risky Home Loans Market
Citigroup C and Credit Suisse CS have re-entered the risky mortgage loans market or non-qualified mortgage, wherein they provide new home loans to borrowers with poor credit scores. The move followed two other Wall Street biggies, JPMorgan Chase JPM and Wells Fargo WFC, both of which made a comeback with ‘private-label’ bonds in late-2018.
Citi’s first comeback deal involves $362.58 million worth of loans originated by Impac Mortgage Holdings. Per DBRS, a credit reporting agency, the company is acquiring non-QM loans from lenders with an aim to re-sell in the secondary market.
Also, Credit Suisse is mulling to sell $355.8 million of non-QM bonds of mostly adjustable-rate mortgages on homes predominantly in California, per Kroll Bond Rating Agency. Though the agency assigned Triple A ratings to the company’s bond, it fears that adjustable-rate loans can “result in payment shock”.
Non-QM loans can be related with the large number of subprime loans that were responsible for the 2008 financial crises..