Investors betting on default-prone mortgages

TRD 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
(iStock)

Banks required balloon payments, stayed mum on foreclosure moratorium

Banks required balloon payments, stayed mum on foreclosure moratorium
Fed Board Governor Lael Brainard (Getty, iStock)

Fed wants banks to step up lending in low-income areas

Fed wants banks to step up lending in low-income areas
Wall Street investors are prepared to buy and turn single-family homes into rentals when forbearance programs expire and homeowners look to sell. (iStock)

Wall Street investors bet on single-family rentals as mortgage payments stack up

Wall Street investors bet on single-family rentals as mortgage payments stack up
(iStock)

Landlords lost about $9B in rental payments last quarter: report

Landlords lost about $9B in rental payments last quarter: report
Fed Reserve Chairman Jerome Powell (Getty)

What low interest rates through 2023 means for real estate

What low interest rates through 2023 means for real estate
As rates hold steady at 3 percent, the average loan hit another record high: $370,200 (iStock)

Size does matter: Mortgage loan average swells to new record

Size does matter: Mortgage loan average swells to new record
Ed Adler and Wendy Silverstein (Getty)

Wendy Silverstein, Ed Adler launch loan restructuring biz

Wendy Silverstein, Ed Adler launch loan restructuring biz
The rates for a 30-year fixed-rate mortgage dropped 7 percentage points for the week ending September 10, reaching 2.86 percent. (iStock)

Mortgage rates notch new low

Mortgage rates notch new low
arrow_forward_ios

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

Loading...