How to Profit from the Subprime Loan Meltdown
"There is a boom going on" in the subprime loan space -- if you know how to play it. Matthew Crane, president of Stockbridge Financial, joined "Morning Call" to tell viewers how to cash in on one of housing's best-kept secrets.
Crane explained to CNBC's Liz Claman that the current spate of homes and properties being foreclosed end up in sherriff's sales. And the banks that purchase them end up with too many -- and then need to sell these properties back to buyers for "50 cents on the dollar."
In turn, the property buyers need funds to "do quick rehabs and flip them back on the market," continued Crane. That's where Stockbridge comes in, packaging the loans for another level of investor, who buy the loans in bundles and hold them against the properties.
"You can go in for as little as $5,000 or $10,000," Crane said, and amass "$1 million worth of loans in your portfolio."
He declared that investors can make returns of 14% to 20% by owning these loans.
When it comes to subprime, the question of risk is inevitable. But Crane maintained that the dangers are "greatly mitigated" by two factors: investors can "cherrypick" which loans they want to buy into; and if a loan defaults, they can opt for a deed in lieu of foreclosure -- and hold a property instead of a worthless document.