In other words, with fewer foreclosures the value of mortgage-backed securities increase — a big financial problem if you bet a few billion dollars that the value of mortgage-backed securities would fall.
We are now seeing complaints from hedge fund managers that their bets are being distorted by new foreclosure practices. One claim is that those who manage mortgage backed securities can manipulate outcomes by modifying mortgage agreements to avoid foreclosures and by taking other steps. In effect, hedge fund managers want lenders to return to the tougher and costlier practices of the past because saving the homes of people who have fallen on hard times is now reducing profits for billionaire hedge fund operators.
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