South African company Investec is preparing to sell a package of subprime mortgage securities, the first since the mortgage crisis pounded economies worldwide. The potential reopening of the subprime mortgage bond market in Europe is seen as significant by investors and bankers alike.It may be significant for borrowers as well.

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Securitization, which involves taking a pool of mortgages and creating bonds bonds backed by repayments of the loans, was an important form of funding for banks before the crisis. By selling these loans rather than keeping them in-house, banks were able to lend more.

The company has several tiers of loans, ranging from non-conforming products for people with decent credit but hard-to-prove income (comparable to American Alt-A products like stated income loans) to real subprime mortgages for people with bad credit. The first sale will involve the top tier only.

Investec is holding on to the lower-rated equity and mid-level offerings but could sell them in the future.

The loans in the deal were mostly made before the credit crash, when lending standards were lower than the bar at a midget limbo contest, but investors said the fact that they were still paying makes them attractive.

It makes sense: today’s performing pool of 2006 loans doesn't have the ones that defaulted over the past four years, so it's way better now than it would have been in 2006.

Do we really care about the other side of the pond?

We should. If the Euros find a way to make subprime pay, bad credit mortgage lenders may start making a wider range of products available.