Another Fund Jumps into Distressed Mortgages
The number of funds looking to make money in distressed mortgages continues to grow. On Thursday, Denver-based MountainView Capital Holdings, LLC announced the initial closing of its MountainView Mortgage Opportunities Fund, LP, saying that the fund had raised approximately $80 million primarily from qualified institutional investors. It's not a large fund, to be sure, relative to many of the other competitors now jostling for position in a distressed debt market that sources tell HW they expect to begin moving in the back half of this year -- but MountainView's entry underscores that even smaller funds are now seeing opportunity in the field. MountainView said it expects to invest in performing and subperforming first lien residential mortgage loans in the secondary market, primarily in subprime and Alt-A. And, like others, it will look to generate a return by aggressively modifying the loans it purchases; in fund-speak, this tends to get represented as a "buy and hold" strategy. The company owns its own captive servicing operation, Arlington, Tex.-based Prodovis Mortgage, LLC, which will initially service all loans acquired by the fund. The "high-touch" servicing shop specializes in servicing performing and subperforming Alt-A and subprime first and second lien mortgage loans, and the fund's managers said the servicing shop will aggressively look to prevent defaults on the loans it boards. "We are excited about the level of interest we have received from investors and are now ready to start deploying the capital that we have already raised," said Michael Morgan, CEO of MountainView. "We are seeing unprecedented dislocation in the secondary mortgage market which we believe will create tremendous buying opportunities for those investors that have the platform in place to understand and assess the risks associated with the purchase of mortgage loans." MountianView isn't alone. Earlier this week, The Blackstone Group (BX) invested $1.25 billion in a partnership with Coral Gables-based Bayview Financial, in an effort to go after the same market for distressed residential mortgages. San Diego-based National Asset Direct owns its own similar "high-touch" servicing shop called iServe Servicing, which serves as the back end of its whole loan purchasing operation. The company recently moved into the California market with a license to grant and service loans in the state. BlackRock Inc. (BLK), the biggest publicly traded U.S. asset manager, said in March it was backing a new company called Private National Mortgage Acceptance Co. LLC, also known as PennyMac, that will buy mortgages at a discount and look to service them in-house. PennyMac has a $2 billion war chest of its own; BlackRock also recently negotiated a deal to snap up $15 billion in mortgages from Swiss bank UBS AG (UBS). And Marathon Asset Management, LLC, a global investment manager with $10.6 billion under management and over $20 billion in assets, is also buying up distressed mortgages and is also pumping the mortgages it buys to its own captive servicing operation, Phoenix-based Marix Servicing, LLC. Other third-party servicing shops are springing up to work with funds that want to acquire and manage distressed mortgages, as well. Plano, Texas-based Acqura Loan Services is one such shop, and CEO David Vida has told HW in the past that his firm has seen strong demand from investors looking for customized loss mitigation and aggressive modifications. Disclosure: The author held no positions inthe firms mentioned in this story when this story was published; other indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.