Will Citadel’s New 2nd-Lien Spur Similar Offerings by ‘A’ Paper Nonbanks?

Citadel Loan Servicing recently rolled out something the residential market hasn’t seen in quite some time: a nonprime second lien from a nonbank. But don’t expect a groundswell of copycat loans or a rush by A-paper nonbanks to make seconds.

Anecdotal evidence suggests that a handful of nonbanks are involved in 80-10-10 loan structures, selling both liens to correspondent buyers that are depositories. But as far as loan volumes are concerned, the dollar volume of seconds presently being facilitated in such transactions is negligible.

Calls to nonbanks from Inside Mortgage Finance revealed a great deal of interest in the Citadel product, but with none showing much of a desire to do something similar in the prime market.

“I don’t see us going down the same path of destruction that led to the industry’s demise,” said Paul Rozo, chief executive officer of Paramount Residential Mortgage Group, Corona, CA. “Keep in mind that even though Citadel’s product is labeled nonprime or subprime, it’s an ‘old school’ equity loan product capping out the [combined loan-to-value ratio] at 80 percent.” For the full story, see Inside Mortgage Finance.