INVESTMENT BANKS HAVE rushed to buy subprime platforms this year. Merrill Lynch bought a mortgage unit called First Franklin for $1.3 billion, and Morgan Stanley purchased Saxon Capital for $700 million. European banks have jumped on the subprime bandwagon; this summer Deutsche Bank paid $429 million for Mortgage IT and Barclays Capital paid Wachovia $469 million for HomEq Servicing.
It appears to be a logical, if somewhat belated, reaction to the runaway success Lehman Brothers and Bear Stearns have enjoyed in their fixed-income franchises from having integrated mortgage origination businesses.
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