Star bond trader becomes subprime lender

One-time Salomon Brothers star bond trader and Renieri Partners founder Lewis Ranieri is revisiting subprime lending, according to the Wall Street Journal. 

As lawsuits against Wall Street firms continue to make their way through the courts, Ranieri believes the time is right for nontraditional lenders to enter the market. Bank lending standards have gone from one extreme to the other, he said, from too loose, to too tight. The limited availability of mortgages for the average borrower has provided that opportunity for his recently formed company, New York City-based lender Shellpoint Partners.

“The pendulum has swung too far in the other direction,” Ranieri said. “Mortgage payments are being precluded from home ownership due to banks’ rigid criteria.”

Kenneth Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at University of California and a former colleague of Ranieri, agrees with the strategy. “What Ranieri is doing is exactly what is needed in the market today and serves an important policy need. We should be loosening credit at the bottom of the markets.” [WSJ]