Mortgage Foreclosure & Refinance Resource

In an interesting Slate article Daniel Gross about hedge funds and private equity trying to profit from the mistakes lenders and banks made. While home owners are trying to figure how to refinance arm mortgages some folks are figuring out how to profit from the downturn of the mortgage market. At the rate they are currently going, it seems these folks are just getting themselves into bigger holes then they can handle.

On Aug. 22, Bank of America decided things couldn’t get worse for Countrywide Financial, the massive mortgage firm whose stock had been halved since the beginning of the year. Bank of America boldly announced a $2 billion investment in the form of a security that pays a 7.25 percent annual interest payment and “can be converted into common stock at $18 per share.” In the months since then, Countrywide, stung by a deteriorating housing market, has fallen another 50 percent. Today, its stock trades at about $9.
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Some investors have suffered deeper wounds. On Dec. 10, Warburg Pincus—a very sharp private-equity firm—agreed to invest up to $1 billion in struggling bond insurer MBIA, which had lost 55 percent of its value in the previous two months. Warburg bought 16.1 million shares at $31 a share and committed to fund another $500 million. (The deal also included warrants to buy several million shares of the company’s stock at $40 per share.) Within days, as MBIA dealt with questions about its exposure to collateralized debt obligations and other exotica, the company’s stock plummeted to $19. In less than two weeks, Warburg lost nearly 30 percent on its investment in the shares, or about $183 million.