Despite the predominant prediction of slowing subprime mortgage volume this year, the sector reached near-record issuance levels in the second quarter. Subprime issuance to the secondary market amounted to $127 billion, up from $114.3 in the first quarter and almost matching the record $128.6 billion reached in the fourth quarter, of 2005, according to UBS. Year-to-date issuance in the subprime sector is actually exceeding 2005 levels, at $246 billion compared to $217 billion a year earlier. And even though a handful of subprime lenders - such as Ameriquest Capital Corp. - have drastically trimmed operations - more than a few lenders, including NovaStar Financial, IndyMac Bancorp and American Home Mortgage Investment Corp., recently reported record origination volume in the three months ending June 31.

"Like any factory, you have to have enough widgets flowing through the factory to be efficient," noted Scott Hartman, chairman and chief executive of subprime lender NovaStar Financial during the company's second quarter earnings conference call.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.