The Great Unwinding: Coast to Coast, Banks Starting Big Selloffs of Residential Debts
08/14/2009 By: Adam Weinstein
Perhaps it’s “government pressure to clean up balance sheets,” or the thawing out of home sales, the need for capital, or the growing pool of players in the mortgage-backed assets market.
Whatever the motivation, more banks are beginning to unwind their positions in toxic residential loans.
Earlier this week DS News reported one such deal, by Milwaukee-based Marshall & Isley, to sell a pool of 800 troubled Arizona mortgages to an undisclosed buyer. The sale cleared $297 million of loans from M & I’s ledger.
Now big banks are joining the selloff, too, hoping that a few
better-than average quarters can help them withstand the write-downs. Wells Fargo unloaded an underperforming pool of $600 million in mortgages to a subsidiary of the hedge fund York Capital Management. According to estimates of other bidders, those loans probably sold for 35 to 40 cents on the dollar.
York is one of many hedge funds and private-equity firms that are entering the mortgage market, looking for distressed debt that can be bought for a song and might yield profits as loans continue to be modified. Many firms are raising investment capital for those purchases by making initial public offerings of stock, as DS News recently reported.
Other players in the buyers’ market read like a who’s who of hedges and capital firms: DellaCamera Capital Management; BlackRock and Highfields; Jacobs; Marathon; Starwood and Apollo.
If this trend becomes a full-fledged movement, who will be the real winners? “Borrowers, who have had a tough time modifying their existing loans with large banks,” the New York Times DealBook blog said today.
For the first time since the credit crunch became a full-on crisis, the owners of those borrowers’ debts might be willing to do some workouts with real benefits.
Banks are about to unload inventory… and flood the market as much as they can…
Author: Adam Weinstein • Date: 08/14/2009 • Tags: Starwood Property Trust Inc., Wells Fargo • Category: Loss Mitigation, Mark