Carrington Mortgage Holdings, a midsized lender based in California, will be entering the "nonprime" mortgage market, offering loans to borrowers with "less-than-perfect credit."
Rick Sharga, executive vice president, says Carrington will allow its borrowers to have FICO credit scores as low as 500. Yet, there will be variation among loans: higher-risk borrowers will be required to put down more money, and likely at a higher interest rate. CNBC reports that Carrington will originate and service the loans, but it will also securitize them for sale to investors. Angel Oak, another mortgage lender, has been offering and securitizing nonprime mortgages over the past two years.
"We believe that more competition is positive for the marketplace because there is strong enough demand for the product to support multiple originators," said Lauren Hedvat, managing director, capital markets at Angel Oak. "Additionally, the more competitors there are, the wider the footprint becomes, which should open the door for more potential borrowers."