Mortgage market targeted by hedge funds

Calcutta News.Net
Tuesday 5th August, 2008

Dozens of hedge funds and private equity groups have been quietly building equity in the beaten-down mortgage market in the US.

Tens of thousands of distressed loans and foreclosed properties have been sold to hedge funds, run by former Wall Street and lending industry executives.

The hedge fund managers claim they can do a better job than banks or other investors of modifying mortgages at terms that consumers can afford.

Merrill Lynch for example, has sold mortgage-linked investments once valued at $30.6 billion for just $6.7 billion to Lone Star Funds, a distressed-debt investor in Dallas.

New Jersey-based Biltmore Capital Group has dedicated itself to buying up to $100 million in mortgage debt each year.

In many cases the hedge funds obtain the property through foreclosure and try to sell it off in return for not pursuing the outstanding mortgage balance.

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