Gold Rush or Fool’s Gold? Funds Jump into Distressed Mortgages

Via Reuters, a look at two funds that are already starting to make noise in distressed mortgage assets — Trust Company of the West, which has sunk $1.6 billion into mortgages since January, and Marathon Asset Management, which said it recently purchased more than $1 billion (par value) in distressed mortgages.

From the story:

Trust Company of the West has invested most of its $1.6 billion fund for distressed mortgage assets since January on a bet that the market has established a bottom, Chief Investment Officer Jeffrey Gundlach said on Thursday.

The TCW Special Mortgage Credits Fund launched in July 2007 is now 80 percent invested, compared with just 8 percent in January, Gundlach told clients at a forum in New York.

“For the first time since this mortgage crisis began, there is the possibility that the market has found a bottom,” he said. There is “something like a 20 percent chance that that bottom holds.”

The story also mentions Marathon, as well — Marathon owns its own special servicer, Marix Servicing LLC, part of a new breed of so-called “high touch” servicers that are looking to carve out a niche in special servicing as the number of troubled borrowers continues to mount. Others, including Plano, Texas-based Acqura Loan Services, aren’t tied to a particular fund but cater to the needs of a number of hedge funds and other investors that are acquiring assets and need a servicing partner that focuses on heavy borrower contact and aggressive loss mitigation strategies.

Estimates gathered by Housing Wire suggest that more than $400 billion in private capital may be waiting to jump into distressed mortgages over the next 12 months; this story shows that, at least for some, waiting is no longer part of the playbook.