BluefoxToday blog : Mortgage industry about to attract fresh capital

Mortgage industry about to attract fresh capital

Investors are returning to the residential real estate market and that is a sign of a turnaround in the making. It may not happen tomorrow, but it's coming. There are all sorts of investors who desire to take advantage of the slumping market. In Las Vegas, for instance, they are looking around for single-family houses, condominiums and townhomes to buy and are finding bargains up and down the valley. Some might purchase just one or two of them while others go for a block of attractively-priced property.

These investors certainly are helping in reducing the glut of homes currently available for sale not only in Las Vegas but also in many other areas of the country and their activity is working well towards restoring a viable supply-demand equilibrium to the market.

Another class of an investor is about to enter the picture, however. The more of them the struggling market attracts, the sooner it'll find its footing and recover. All groups of investors are warmly welcome.  

This other class of investors is normally made up of large financial entities and they play with big money. They are called listed hedge funds, private equity firms and closed-end distressed asset funds. They participate and provide financing in many different industries and are now turning their sights on the mortgage business. The present credit crunch has generated a bunch of mortgage-backed assets that often are valued way below par and that, of course, means opportunity. And they are smelling it now. Good.

Some of them have already raised billions of dollars and are waiting to put the money to work in the near future. They are now spending time to understand exactly what types of mortgage securities are out there and which ones make sense for their particular portfolios. One of the famous finance vehicles of the recent past is the CDO, or collateralized debt obligation, that uses chopped-up home loans as its backbone. These investors are now checking them out closely, as they can be quite complicated.

This development is undoubtedly good news for the real estate and mortgage industries. Even though these securities will be bought on the cheap, it'll still bring fresh capital to the coffers of mortgage lenders and consequently will allow consumers to secure home loans and then go out and buy homes. Once these investors decide to enter the scene in full force, it could well be more stimulus than what the government actions have done so far.


Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 6 commentsEsko Kiuru • August 30 2008 10:26PM


Esko -

In conversations with friends and associates in the mortgage industry, the topic always comes up - What happens if wholesale goes away? What will happen to the mortgage brokers?

Your post above is my typical response. There is just too much of a market and the chance to make big bucks by lending money for homes. The big hedge funds are certain to look at this opportunity. Other countries have got to be chomping at the bit for the US mortgage industry to disappear. Someone will replace whoever leaves the business.

There is a market for lending money for real estate. The rules may change. The names may change. But mortgage loans are not going away.Excellent post!



Posted by Lewis Poretz, Mortgage Loan Officer - Lending in 50 States (Bank of England Mortgage) about 10 years ago

Esko: That is good news. I feel like the other shoe still needs to drop for a little bit longer but I think we're closer to recovery. Once the banks sort out their ills, we can go full speed ahead. Take care.



Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) about 10 years ago

Esko anything that starts to turn this market around would be welcomed right about now.  Thanks for the info.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 10 years ago


Mortgage industry is one of the backbones of the entire economy.

Posted by Esko Kiuru about 10 years ago


When new money starts moving in, things are about to turn.

Posted by Esko Kiuru about 10 years ago


Looks like the cavalry is on its way.


Posted by Esko Kiuru about 10 years ago