As a brand new managing director at the asset trading and finance group of PaineWebber Inc., Gordon L. Monsen will be focusing on the booming market for subprime-mortgage securitizations.
The 15-year veteran of the mortgage securities business was hired last week by New York-based PaineWebber after serving as president of the Mortgage Research Group, a whole-loan credit and equity research firm he founded two years ago. His mission will be to bring PaineWebber into the subprime loan market. Mr. Monsen said he expects PaineWebber to do "a baker's dozen" deals in the upcoming year.
Mr. Monsen's focus on subprime securitization is rooted in his long background in mortgage performance analysis, he noted. He plans to use his experience to find ways of constructing more-advantageous financing, securitization, and credit enhancement techniques at PaineWebber.
"We're working aggressively on all of the subprime areas," Mr. Monsen said. "We're trying to push the envelope in terms of creative financing."
"I think this market is going to grow exponentially," he said. Cash flow from securitization has already helped fuel subprime lending into the fastest-growing segment of the mortgage industry. And rising consumer loan delinquencies promise to add fuel to the fire.
"Consumer debt is running at an 11-year high," he explained. "We're looking at many people who have debt-to-income ratios in the 50% to 75% range."
High on Mr. Monsen's list of products to watch: 125% loan-to-value credit, often used for debt consolidation, and loans with lower credit quality.
The 125% LTV product, which many subprime lenders have offered for the first time this year, provides borrowers with a way to relieve their overextension by allowing them to roll credit card debt into a second mortgage.
Worries about delinquency rates and their effect on the performance of the relatively new securities backed by subprime loans are overblown, Mr. Monsen said. "There is more (loan performance) history than people are suggesting," he said. "It's just a question of being aware."
Household Finance, Beneficial, and Associates have been making loans to credit-impaired borrowers since the "dawn of time," he noted.
"I don't think it requires any great intellectual leap to say that there will be higher delinquency rates with these loans, the issue has always been how to price appropriately for that risk," he said.
Previously, Mr. Monsen held positions with Bear, Stearns & Co., Dow Jones Telerate, and the Federal National Mortgage Association.