Legg Mason chairman and chief investment officer Bill Miller told CNBC’s Squawk Box that Legg Mason is bullish on big subprime mortgage servicers like Nationstar (NSM).
"We think subprime, which was a disaster before, is a growth area now," Miller said. Legg Mason is one of the largest asset management firms in the world.
Miller also said he thinks reconstituted subprime lender Springleaf is a company to watch.
Nonbanks now service 72% of non-agency deals. Large nonbank servicers such as Ocwen and Nationstar have absorbed much of this product, with their total servicing portfolios growing by 250% and 100%, respectively, over the past 12 months.
Nonbank servicers have consistently been more proactive in their use of loan modifications and are seeing shorter overall timelines, despite concerns by some regulators about their growth and its affect on borrowers.
In February, Moody’s Investor Service cited concerns that each of the nonbank mortgage service companies will begin originating nonprime mortgages. Nationstar and Ocwen were both recent targets of Benjamin Lawsky, New York’s top banking regulator.
Miller also told CNBC that he hopes Citigroup (C) sells its subprime unit to Springleaf because it would be good for both companies.
Watch Miller talking about nonbanks here.