Smaller, thinly capitalized investors in nonperforming mortgages could face liquidity concerns in the coming months as private equity investors begin to re-examine their commitment to the business while bolting for higher returns elsewhere.

No one is predicting a massive exodus of PE money from the sector quite yet, but industry veterans believe the business could soon bifurcate with larger NPL firms (with proven track records) holding steady, while smaller players find it harder to get backing.

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