Street Signs

Loan Investor: Subprime Woes Not Affecting Prime Market

We could very well see a big publicly-traded subprime lender go bankrupt. That's what one of the biggest subprime investors in the U.S. told Erin Burnett on "Street Signs."

"We had a lot of rumors going around about liquidations of CDOs and Wall Street banks pulling warehouse lines and potentially pulling lines for additional originators and what it led to was a drive of liquidity for the market," said Bryan Whalen, managing director of Metropolitan West Asset Management--which manages $4 billion in subprime assets.

But Whalen warned investors and the media of reading too much into this "mini-liquidity" crisis and said reports it's beginning to affect the prime market are not true.

"We have seen some increases in delinquencies in the [all day] market, but it’s at the bottom 10% to 20% of that market,” he said. “There will be some pain felt on behalf of holders of all day securitizations at the bottom of the capital structure, because there wasn't enough enhancement."

But Whalen pointed out there is some upside--"While there may be some interim volatility in [bond] prices, over the long run they should provide a good total rate of return opportunity."