From Shawn Tully at Fortune:
At Salomon Brothers in the 1980s, Ranieri virtually invented mortgage-backed securities, the innovation that more than any other led to the explosive growth in homeownership by expanding the pool of money available for lending to buyers. As the head of the mortgage desk, Ranieri assembled a storied band of overweight, uncouth traders whose exploits were immortalized in Michael Lewis’s book “Liar’s Poker.”…
Now Ranieri is championing an inventive solution for fixing the mess he’s accused of enabling in the first place. Ranieri has raised $825 million from 31 foundations and corporate and public pension funds, including the South Carolina Retirement Systems, to form the Selene Residential Mortgage Opportunity Fund.
Selene’s mission is simple: to buy delinquent mortgages at a deep discount, work with homeowners to get them paying again, and resell the now stable loans for profit. To get homeowners to do their part, Ranieri is taking the radical step of substantially lowering their mortgage balances.
His vaunted intel says there’s another 10% decrease in home values coming. Immediately following the printed article is one predicting -2.8% for GSO, -2.3% for CLT and -4.38% for RAL. In comparison, Moody’s is predicting -33% for Miami in 2010.
With nearly 2 million homes in foreclosure, they’re forecasting 2.4 million more next year.
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