Wednesday, August 15, 2007

Trendwatch: Watching for Vultures

Like everyone else, I find myself watching the news to see which lender or hedge fund is going to bite the dust next. Very proud to see Thornburg fighting back against all odds. That's a company that deserves to survive, IMHO.

But even more interesting to me is who will come in when the dust settles (or just before) and snap up all the cheap servicing rights. I just had a conversation with a mortgage industry consultant who told me that scratched and dented loans are going for about 50 cents on the dollar right now.

"With delinquency and default approaching 13%, we're looking at 87% of the pool a money-making proposition," he said. "Someone is going to make a lot of money."

I suppose that's true, but it won't be as easy as it sounds. It all comes back to loss severity, which is a real threat in markets where properties are no longer appreciating. Even so, someone is going to come in and snap that stuff up. I'll be very interested to see who it is and how they proceed.

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