Go and visit the Web site of a private equity or hedge fund, or one of these management firms like Tourmalet Advisors. You get a nice big graphic, a phone number that leads to a cryptic operator telling you to leave a message, and an e-mail address that directs your message to a bulk inbox. That’s it. No “About Us” page. No cute logos. No Facebook link. These businesses nest in the canopies above Manhattan like big, wise birds and wait. And watch. Some even call them vulture funds. The people who run them glide in and out of investment banks and government offices that are not only too big to fail but too big and too exposed to solve the mortgage crisis. These people don’t even have titles on their business cards. But, you know what? They’re going to save us all. The current economic crisis has brought down an unprecedented increase in the number of failed banks. Closings in 2009 increased almost 500 percent from 2008 and represent roughly 70 percent of total bank failures for the entire decade, according to a white paper from Grant Thornton, a research and advisory firm. And 2010, according to the available data, is going to be worse. The number of insured institutions on the Federal Deposit Insurance Corp. (FDIC) “Problem List” is still growing. At the end of 2009, there were 702 insured institutions on the list, holding almost $403 billion in total assets. At the end of 2008, that number was 252. And it was just $159 billion in assets. But, the really bad news comes when the FDIC is trying to balance its checkbook. The FDIC doubled its receivership funding over 2009 in its 2010 budget proposal, according to accounting firm Grant Thornton, meaning there are more failures to come. But this isn’t a bad thing for these private equity firms. Like Colonel Kilgore (Robert Duvall's character) uttered during a nightmarish battle scene in Apocalypse Now, these firms love the smell of napalm in the morning. “One thing appears certain – bank failures coupled with FDIC assistance will continue to present significant opportunities with clear and unique benefits for healthy banks and other investors,” according to Grant Thornton. ... The U.S. Treasury Department formed the Home Affordable Modification Program (HAMP) in March 2009. It gives incentives to servicers to modify loans on the verge of foreclosure. A year into the program, servicers provided 170,207 permanent modifications, far short of the 3-to-4 million the Obama administration set for the program. Now, the Congressional Budget Office is reporting that the program will not cost the original $75 billion the Treasury anticipated but closer to $20 billion. The Treasury responded in March by introducing new initiatives to reduce principal. Bank of America, the country’s largest bank, was the first to take up the charge, anticipating that its new principal reduction program will help 45,000 borrowers get their loan-to-value ratios down to 100 percent. Meanwhile private funds are sweeping outside of the media spotlight, gathering up the unknown mounds of loans that fail these programs, and they’re making money doing it. Some individual borrowers will benefit from the programs, but some of the ones that don’t get the modification end up getting a business card from one of these funds. And they’re healthier than some have expected. ... When HAMP was showing signs of coming up short, the Treasury released plans of a new sister program: the Home Affordable Foreclosure Alternatives Program, or HAFA. It will launch April 5, 2010, and after that, servicers can get incentives for conducting short sales or deeds-in-lieu of foreclosure. The market responded with a wave of short sale build up. Software and third-party vendors started marketing new products in the fall of 2009 after HousingWire broke the story on HAFA. But vulture funds aren’t going to sign a short sale agreement under HAFA. They don’t sign a servicer agreement under HAMP either. The formulas for determining the Net Present Value (NPV) of the loans in those programs are not equal to what the current market will pay for those loans, according to sources in these firms. They say the value that the HAMP model kicks out no where near approximates what that loan is worth. Economics tells you that the value of something is what a ready, willing and able person is willing to pay for it. The private-equity types are ready, willing and able buyers, and there’s now way they’d pay those prices for those modified loans. TO READ THE FULL STORY, SUBSCRIBE NOW.