The subprime RMBS market in 2006 arguably boiled down to a game of tug-of-war. On one side, hedge funds were eager to capitalize on a perceived gloom-and-doom scenario fraught with a busted housing bubble and empty-pocketed subprime borrowers. CDO managers, ever the real estate bulls, were on the other. And while these two sides are expected to continue their dance of supply and demand through yearend, a crop of subprime lenders - no longer able to carry the weight of investor buy-back requests - appeared to become the losers, at least for now.
Ownit Mortgage Solutions and Sebring Capital Partners recently closed their doors, and a host of subprime lenders leftover from the wave of investment bank acquisitions that took place this year are still seeking the refuge found in richer parent companies. A particular surprise for some market participants, Ameriquest Mortgage, a subprime lending arm of ACC Capital Corp., appears to be among them.