Investment Opportunities in Subprime?(Report)

ST. PAUL, MN -- High default, foreclosure and bankruptcy rates are scaring off subprime market investors. But according to an Advantus Capital Management report, when investors overreact opportunities emerge, mainly in the form of businesses being sold "at severely reduced prices."

Beyond the bad news for the industry in general and individual players in particular, the study maintains those who will weather the storm will benefit from the subprime market ordeal. As to what type of investor is missing out and who can benefit the most from potential opportunities, it may depend on expertise and long-term goal-oriented management.

In their second-quarter 2007 company report, investment analysts Sean Timonen and Joseph Scanlan suggest, "The market dislocation, however volatile, has also provided the potential for opportunity. Even those players looking to maintain, or reduce capacity (without exiting altogether) will benefit as the competitive landscape becomes more rational."

It is indicative that data as of April 6 show two of the country's largest subprime lenders, New Century Financial and Fremont Investment & Loan, had filed for bankruptcy. Also on file for bankruptcy, Ownit Mortgage Solutions ranking 20th with 1.5% market share, ResMae Mortgage Corp. ranking 21st with 1.2% market share and Mortgage Lenders Network USA ranking 22nd with 0.9%.

The industry profile certainly is not rosy, yet analysts state, "A more careful assessment shows that while some companies in the subprime market face serious difficulties, mitigating factors will protect others."

If so far mortgage experts and common sense of "do not put all your eggs in one basket" always stressed the importance of diversification, it appears the marketplace once again proved the old belief right.

According to the study there are two main mitigating factors.