Investors betting on default-prone mortgages

New York /
Feb.February 16, 2012 04:00 PM

Texan investor Kyle Bass, who made bank in the last few years by betting against subprime debt before the crash, is raising money for a fund to buy home loan securities, Bloomberg News reported, joining several other investors who’ve opted to bet on default-prone mortgages.

Billionaire hedge-fund manager John Paulson and former Deutsche Bank trader Greg Lippmann have a similar strategy, Bloomberg noted; The moves come as faith mounts that Europe’s sovereign debt crisis will be contained. Even the riskiest mortgage securities are now priced to withstand an economic slump, investors think.

“You can end up, even using severe assumptions on things such as home prices and defaults, with a very high yield based on the prices that bonds are trading at,” said Larry Penn, CEO of Ellington Financial. “Especially with interest rates this low, if you can buy something where you can end up with a double-digit yield under severe assumptions, that’s great.” [Bloomberg]


Related Articles

arrow_forward_ios
(Photo Illustration by Steven Dilakian for The Real Deal with Getty)
Mortgage applications surge 25% in the new year as interest rates drop
Mortgage applications surge 25% in the new year as interest rates drop
A photo illustration of Blend Labs CEO Nima Ghamsari (Getty, Blend Labs)
Digital mortgage firm Blend cuts 30% of staff
Digital mortgage firm Blend cuts 30% of staff
Wells Fargo puts the brakes on mortgage business
Wells Fargo puts the brakes on mortgage business
Wells Fargo puts the brakes on mortgage business
From left: United Wholesale Mortgage's Mat Ishbia and Phoenix Suns' Chris Paul, Devin Booker, and Deandre Ayton with the Footprint Center
Mortgage lender exec poised to buy Phoenix Suns for $4B
Mortgage lender exec poised to buy Phoenix Suns for $4B
John Paulson, Jenica Paulson (left) and Alina De Almeida (right) with various properties owned by John Paulson (Getty; Google Maps; Illustration by Kevin Rebong)
Breaking up a billionaire’s property empire
Breaking up a billionaire’s property empire
41 Pinelawn Road in Melville LI and Reverse Mortgage Funding CEO Craig Corn (Loopnet, RMF)
Reverse mortgage giant lays off 119 on Long Island
Reverse mortgage giant lays off 119 on Long Island
(Photo Illustration by The Real Deal with Getty)
Purchase applications climb as mortgage rates stabilize
Purchase applications climb as mortgage rates stabilize
Leslie J. Garfield's Stanley Montfort (Leslie J. Garfield & Co., Getty)
Co-ownership can help NYC homebuyers, but adds risk
Co-ownership can help NYC homebuyers, but adds risk
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...