Athas gets borrowers who lost their homes during the crash, but O’Shaughnessy said such borrowers are rare. So, besides people who may have low credit scores, or difficult to verify income, why do people who could get prime mortgages come to Athas?
“People come to us because we can approve a loan in 4 hours and close very quickly without the kinds of headaches people get at banks,” O’Shaughnessy said. It is a formula that is working. He says the company has grown an average of 30-50% a year since its founding and that the first 2 months of 2016 have seen double the business of the first two months of 2015.
Interest rates typically run from the high 5s to the high 9s he said, with most falling in the 7s. Most borrowers do not intend to keep the loans for more than 1-3 years, he said.
“People generally plan to refinance, but we get them in their homes quickly and they can refinance at their leisure,” O’Shaughnessy said. He said he recently wrote a loan for someone with verified income and a FICO score in the 800s, because the borrower was in a hurry and didn’t want to deal with a traditional lender.
“The dynamics of this market are very different than what we saw from 2000 to 2007. Everyone talks about ‘liar loans,’ and those certainly were out of control. If people would have had more skin in the game, the results would have been different. I’ve been in the business 30+ years, and that was a really strange dynamic back then.”
Athas also loans to investors, doing commercial loans up to $5 million.
O’Shaughnessy’s view of prime lenders was reinforced recently when he took out a personal mortgage with a bank. “I had a credit score in the 700s, full documentation, and it took hundreds of days and was the worst experience of my life. They made me explain things that have no bearing on my credit. The reason we are successful at Athas is because of what the banks are doing to borrowers.”
The subprime market is not a train wreck waiting to happen today the way it was 10 years ago, at least not the way Athas Capital Group and its subprime borrowers approach it. Not only does Athas require borrowers to put at least 20% down, but many have credit scores in the 7s and 8s, and many have verifiable income sufficient to get ‘A’ paper, according to Athas co-founder and co-CEO Brian O’Shaughnessy. “We call it ‘sane subprime,’” he said.