“There are certainly some people out there whose model in certain non-QM is to bulk up loans, and they got it handed to them,” he said. “Market moves, some were hedged, and others were not hedged.”
He has not heard of any that went out of business, though some took heavy losses.
“If you’re bulking and let’s say you just lost $15 million on a trade of $300, $400 million, how many of those trades have you had in the last 24 months where you made $15, $20 million?” he said.
Halpern had also heard, though not firsthand, about a mortgage bank left unhedged on a couple hundred million dollars in loans when the market moved.
“My first thought is, okay, well, that’ll be good because maybe it puts someone out of business, maybe there’s more business that comes,” he said. “Then I thought about it, and that’s not necessarily a good thing because ultimately who has a problem? It’s the warehouse banks. If the warehouse banks have a problem right now, they’re going to be looking at our haircuts, right? So it goes from anywhere from 100 to 95.”
