Hedge funds, private equity groups, and pension funds are actively seeking and beginning to purchase problem mortgages in bulk from investment banks and lenders that are desperate to clean up their portfolios, according to the Palm Beach Post.
For example, Lone Star Funds, a Dallas-based opportunity fund, has agreed to purchase a $30.6 billion mortgage portfolio for 22 cents on the dollar from the New York City investment bank Merrill Lynch & Co. The purchase price of $6.7 billion works out to a discount of $23.9 billion off the book value of the portfolio, according to the article.
As Lone Star Funds buys loan portfolios secured by various residential assets, many private equity groups, hedge funds, and institutional investors are searching Florida, California, Nevada, and Arizona for stumbling national and state banks that are willing to sell off loans on specific projects at deep discounts.
Banks are increasingly willing to deal in hopes of shoring up their balance sheets in hopes of avoiding repercussions from federal regulators that have shut down seven banks in 2008. Three banks located in the distressed real estate markets of California, Nevada, and Arizona were shut down by the Federal Deposit Insurance Corp. in the month of July.
No Florida bank has yet been seized although speculation is swirling that such an action could be coming given the plummeting real estate market in the Sunshine State.
Banking analysts have identified two Florida-based institutions that are the watch list of regulators. The two institutions combined by more than $1.2 billion in assets and 19 locations in Florida.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .
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