There’s more bad news to come from subprime mortgages but the sector’s meltdown is unlikely to spread, said Scott Simon, a portfolio manager at Newport Beach’s Pacific Investment Management Co. on Wednesday.
More loans going bad are expected, Simon said. And subprime borrowers stand to have a tough time getting a loan, he said.
But the sector’s meltdown doesn’t seem to be impacting the best part of the mortgage market, according to Simon.
“Subprime is tightening, not prime,” he said.
Simon spoke to an audience of about 180 in Irvine.
The real test stands to come in a couple of years when more subprime borrowers look to refinance their mortgages, Simon said.
Trouble could come from those who borrowed 100% to 200% of the values of their homes and had low credit scores, he said.
