The Weekend Economists' Panglossian Pandemic January 20-22, 2012

[Demeter]

78. Angelides to lead distressed mortgage firm

http://www.reuters.com/article/2012/01/13/us-usa-housing-angelides-idUSTRE80C26820120113

Phil Angelides, formerly the chairman of a federal commission who led investigations into why the financial markets collapsed, is heading an investment group that hopes to "do a good thing" for America while turning a profit from the wreckage of the housing market. VULTURE CAPITALISM, IN PEACOCK'S FEATHERS The startup company, of which Angelides is executive chairman, seeks to raise money from investors to purchase troubled mortgages from banks and other financial institutions in order to help keep homeowners from being foreclosed upon, according to a January 4 letter reviewed by Reuters.

The company, Mortgage Resolution Partners, claims its strategy of using "legal and political leverage" to acquire the loans could generate a 20 percent annual return for investors. The company intends to purchase mortgages at a steep discount and re-work them to enable the homeowners to continue making payments, with the firm collecting the proceeds. "We just might do a good thing for America, and along the way get a great return on investment," says the letter to prospective investors. "If our hopes do not pan out, the amount wagered should be a deductible loss." In the letter, the mortgage company refers to its political connections as its "secret formula."

Angelides, a former California state treasurer, Democratic politician and land developer, was head of the Financial Crisis Inquiry Commission until last February. Planning for the Mortgage Resolution Partners began last summer, less than five months after the Commission wrapped up its work in Washington, D.C. In January 2011, the Commission issued a 662-page report that highlighted Wall Street's role in the collapse of the U.S. housing market....The idea of investment groups buying distressed mortgages and writing down the principal and attempting to make money by keeping homeowners current on their new mortgages isn't totally new. A handful of other investment funds are trying that, including Selene Residential Mortgage Opportunity Fund, founded by mortgage-backed securities pioneer Lewis Ranieri. But the more common approach is for investors to raise money to buy foreclosed homes and rent them out. Lenzner, the spokeswoman for Mortgage Resolution Partners, said since the group has just been launched "it's premature to determine" the firm's final approach to the mortgage problem because it is "still in the research and development stage."