The Bailout: Will the Sequel Pack a Bigger Punch?
Will private money get in the game?
Geithner must sign up hedge funds and other private investors to the new public-private partnerships he's proposed to acquire the banks' toxic assets. Getting a few deals swiftly under way could boost investor sentiment.
Details about the partnerships are few. Analysts believe the government might provide, say, the first 20% of the equity, with private investors coming up with the rest. The government would then lend the fund more money so that its seed capital, using a modest amount of leverage, could be stretched.
It's unclear, though, why private investors would sign on. They can buy bad assets now on their own. Treasury hopes its willingness to boost investors' returns with some leverage will entice them. "Financing is so tight, it's difficult for private investors to find leverage," says Jacob Benaroya, managing partner of Biltmore Capital Group in Rochelle Park, N.J.
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Bailout, Take 2: Investors want US to share risk
WASHINGTON (AP) — Investors want the Obama administration to sweeten the deal before they agree to buy risky debt from U.S. banks as part of the government's retooled program to rescue the ailing financial industry.
The administration is expected to announce Tuesday that the government's latest bailout strategy will be enticing big investors to buy more than $1 trillion in troubled assets from the banks. The hope is that, free from the drag of subprime mortgage debt and other bad investments, banks will be more likely to start lending money again and the economy will rebound.
"I want to see the incentives and the restrictions," said Jacob Benaroya, managing partner of New Jersey-based Biltmore Capital Group, a hedge fund that's buying up to $100 million in mortgage debt per year. For example, he said, he's unlikely to be interested in buying loans that must be held for 30 years.
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Paul Jackson
Firms Target Growing Niche in Market for Bad Mortgage Debt
The market for sub and non-performing mortgages is booming. (But you knew that, right?) What you may not know — yet — is just how diverse a crowd of investors are looking to stake a claim in varying sides of the market. Here at HW, we’ve covered some of the much larger funds jumping into the space looking to make a huge splash with billion-dollar commitments.
But for every publicly traded hedge fund sensing a large-scale buying opportunity, there are others more content to pursue smaller deals and REO acquisitions that may deliver yields every bit as high. One well-known such player in this niche space is Rochelle Park, New Jersey-based Biltmore Capital Group, LLC, which has been buying up REO properties and distressed mortgage debt since 2005. The fund purchases up to $100 million in debt each year.
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Shelly Banjo
$19.5 Million Hamptons Mansion In Foreclosure
The foreclosure mess is casting a shadow over New York’s Hamptons this summer. One result: An 18,000-square-foot Bridgehampton home has been reduced from its $27 million asking price to “just” $19.5 million.
The Bridgehampton mansion, which was built by Burns Development Corp., on more than 4 acres of land, played host to the 2006 Hamptons Designer Showhouse, an annual event where notable interior designers outfit a Hamptons home, showcasing trends in luxury home design to potential clients.
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Alan Zibel
Hedge funds are buying up delinquent mortgages
"We're much easier to deal with than a bank," said Jacob Benaroya, managing partner of New Jersey-based Biltmore Capital Group, a hedge fund that's buying up to $100 million in mortgage debt per year. "We've bought (the loan) at enough of a discount that we can make special arrangements with the borrower."
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Many claim that they can alter terms
of loans much easier than banks
The investor had offered to cut the value of the $410,000 loan by $50,000, but she still couldn't qualify for a new loan because the value of her property had plummeted by nearly $100,000. "If I could have just had it modified, I could have kept it," she said. "I didn't want to tarnish my credit report...It's just so sad."
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SA Editor Judy Weil
Quote of the Day
They are buying them from Wall Street investment banks eager to rid themselves of bad assets. Merrill Lynch & Co., for example, said this week it would sell mortgage-linked investments once valued at $30.6 billion for just $6.7 billion to Lone Star Funds, a distressed-debt investor in Dallas.
Many of the hedge funds, run by former Wall Street and lending industry executives, claim they can do a better job than banks or other investors of modifying mortgages at terms that consumers can afford.
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LEW SICHELMAN
REALTY Q&A
Short-term fix, long-term cost
Don't raid retirement savings to pay the mortgage
WASHINGTON (MarketWatch) -- Question: I have two home loans totaling 100% financing. Both are variable rate, interest-only loans. The 80% loan is a 5-year ARM; the 20% loan is a home-equity loan in which the rate changes monthly. I have been in my $389,000 home since July 2004 and I am starting to have trouble making the payments, but I have not missed one yet.
The present value of my home is probably less than what I owe on it, but not greatly so. The only money I have available to continue to make the payments is my 401(k). Should I withdraw funds to stay in the house and sell it when the market turns around? Also, if I do, would the withdrawal be considered a hardship withdrawal in IRS terms?
Answer.
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LEW SICHELMAN
Don't Raid Retirement Savings to Pay the Mortgage
Question: I have two home loans totaling 100% financing. Both are variable rate, interest-only loans. The 80% loan is a 5-year ARM; the 20% loan is a home-equity loan in which the rate changes monthly. I have been in my $389,000 home since July 2004 and I am starting to have trouble making the payments, but I have not missed one yet.
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ALAN ZIBEL
Delinquent Mortgages
The investor had offered to cut the value of the $410,000 loan by $50,000, but she still couldn't qualify for a new loan because the value of her property had plummeted by nearly $100,000. "If I could have just had it modified, I could have kept it," she said. "I didn't want to tarnish my credit report...It's just so sad."
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LAUREN TARA LACAPRA
How to Hang On to Your Foreclosed Home
The biggest issue facing delinquent borrowers today may not be unaffordable mortgage payments but the self-inflicted wound of avoidance. As long as homeowners are ignoring the situation, it's impossible for them to restructure the debt or walk away with unscathed credit reports.
Though borrowers are undoubtedly strained, the crumbling housing market has made it easier for those at risk of foreclosure to keep their homes. Values have declined, lending standards have tightened for new borrowers, and foreclosures are an expensive and time-consuming process for the lender as well.
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AMY HOAK
Foreclosures, Delinquencies Set Records
CHICAGO (Dow Jones) -- More homeowners headed toward foreclosure in the first three months of 2008, as both the percentage of loans somewhere in the foreclosure process as well as the rate of foreclosure starts reached levels not seen since 1979, the Mortgage Bankers Association reported on Thursday.
The percentage of loans in the foreclosure process at the end of the first quarter rose to 2.47% of all mortgages outstanding on one- to four-unit properties, up from 2.04% in the fourth quarter, according to the MBA's latest National Delinquency Survey. In the first quarter of 2007, 1.28% of loans were in the foreclosure process.
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