Wall Street Examines Delinquent Loans

By: Timothy McFarlin | Published: May 26th, 2010 | Category: Budget & Debts

Chief Executive Officer of the distressed loan buyer, Kondaur Capital Corporation, Jon Daurio said recently, Wall Street firms are very likely to package a bunch of delinquent loans into securities, in order to satisfy higher yields demanded by investors.

Developing residential mortgage-backed securities, with “non-performing” loans is the latest plan to emerge from a stale market, greatly affected by the credit crisis’ sidelining of issuers. There have, within the past year, been a number of bonds backed by existing mortgages—and only one supported by new loans.

“I’m being solicited heavily to securitize my stuff,” Daurio said after a panel sponsored by the Mortgage Bankers Association. Kondaur Capital is, without a doubt, one of the largest buyers of non-performing loans.

After obtaining the loans, Kondaur works closely with borrowers in getting mortgage payments current/up-to-date, or engineers other processes such as deeds-in-lieu of foreclosure, in order to seize the property in question.

Securitization of these non-performing loans is perhaps the most important action to take for investors, who recently, have been accepting poor assets in exchange for a greater yield. Some of these risky assets have been failing as of late, as expanded fallout from Europe’s sovereign debt crisis, caused many investors to re-examine risks they adopted on the expectation the US’ economy was healing.

Daurio said securities backed by non-performing loans, would appear by the end of June. California real estate investment trust, Redwood Trust, sold a $222.4 million mortgage bond, just last month, which was backed solely by newly created loans. It’s evident deals like this can only help the battered housing market by instilling confidence in lenders they can indeed, find buyers for their loans.

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