Subprime loans today are a completely different thing

by Scot Kersgaard30 Mar 2016
Subprime lending is not what it used to be, at least not at California-based Athas Capital Group. Founded in 2008, the name Athas is Gallic for “rebirth”, according to co-founder and co-CEO Brian O’Shaughnessy, a man who clearly loves subprime lending.

Told that many people these days are using the term “nonprime” instead of subprime, he laughed and called the change “politically correct bs. I’m not afraid of subprime. I’m not afraid of calling myself a subprime lender.

“We started this company to bring back subprime when the only option to A paper was hard money or things like HUD. Back in the day, people thought the only people who would consider subprime loans were people who couldn’t get an ‘A’ paper loan, but that is not what we are seeing today,” he said.

“We got in when everyone else was literally running away. It was a strange time, but we dived in.

“Today, ‘A’ paper has a culture of fear. ‘A’ lenders are afraid to make common sense decisions. We can loan to people who are aggressive on their tax returns, but have a ton of cash-flow,” he said. “We will take bank statements as proof of income. We will go above 43% debt to income. You’d be surprised the number of people who come to us with 20 or 30% down, who can’t get a bank loan.”

A 100% portfolio lender, O’Shaughnessy said Athas doesn’t do anything without at least 80% ltv, and said many of the company’s borrowers bring 30%, 40% or more to the table. “I sold my last company before the crash, but even then I had retracted from 100% loans. I didn’t believe in it then, and I don’t believe in it now.

“We don’t do anything really scary,” he said, offering the opinion that the crash of the last decade came largely because people “didn’t have any skin in the game. The crash came about as a collective effort of politicians, banks and consumers. Everyone counted on appreciation to make everything OK, and it didn’t happen like that.”

O’Shaughnessy wouldn’t disclose the number of loans Athas closed last year, or the dollar volume, but said the company, with more than 50 employees and 24 originators, is among the largest subprime lenders in the US.

April 6: Athas Capital Group co-founder Brian O’Shaughnessy talks about the reasons borrowers turn to subprime lenders, and how the market is different from what he saw a decade ago.


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