If you can make money lending money to people who can't afford mortgages, why not make money buying them back. Several former Countrywide (NYSE: CFC) managers have linked up with Blackrock (NYSE: BLK) to set up a firm, Private National Mortgage Acceptance Company, to buy troubled mortgages. According to The Wall Street Journal the new operation "seeks to raise more than $2 billion to buy distressed mortgages on the cheap, work with borrowers to restructure them, and then resell them as performing mortgages at a profit."
The new venture stinks a bit. The people running the venture learned the business at Countrywide, the source of so much of the pain in the current mortgage crisis and the project makes Blackrock appear to be a firm ready to profit from the misfortune of others. Beyond that, the new company seems like a real money-maker.
The Blackrock-supported mortgage-buying operation will have to be careful when it enters the market. If it buys big packages of home loans and the market keeps falling, the start-up could lose a lot of money. Let's hope so.
Douglas A. McIntyre is an editor at 247wallst.com.
Earnings expectations for JC Penney, Nordstrom, Macy's, Abercrombie and others
Comfort Zone Investing: Financial stocks: Is the worst over yet?
How Washington can cut gas prices fast -- and why it won't
Reader Comments (Page 1 of 1)
3-24-2008 @ 11:14AM
paul said...
I don't think Blackrock has too much to worry about and they may be a bellweather for the rest of us. If you think about it, who would have a better inside track on just how bad the sub-prime mess really is than the guys from Countrywide who helped cause it. If they're ready to jump back in like everything has hit bottom and can only go up it may be worth it to keep an eye on them.
3-24-2008 @ 1:43PM
InvestmentMAGE said...
• Private National Mortgage Acceptance Company, PennyMac to invest in shaky mortgages.
This is like a rapist on parole, joining the rape crisis center.
MAGE
I think Blackrock is a short candidate.