BlackRock, Highfields back firm to buy mortgages
BOSTON (Reuters) - Money management firm BlackRock Inc (BLK.N) and hedge fund Highfields Capital Management are backing a new firm that will buy up distressed mortgages, betting that investors are ready to snap up bargains in the beaten down sector.
The new company, Private National Mortgage Acceptance Company, which will be known as PennyMac, plans to raise capital from private investors and will help borrowers restructure loans to avoid foreclosure.
BlackRock and Highfields executives picked industry veteran Stanford Kurland, who spent 27 years at mortgage giant Countrywide Financial Corp CFC.N, as the new company's chairman and chief executive officer. David Spector, who used to oversee global residential mortgages at Morgan Stanley, will be the chief investment officer.
PennyMac is being formed at a time mortgage default rates are rising rapidly and are driving hundreds of thousands of Americans to the brink of foreclosure.
Deepening credit market problems have already slowed U.S. growth and threaten to tip the economy into recession.
But the battered segment may also offer opportunities for savvy investors. Already BlackRock and certain hedge funds have mounted funds to buy up distressed securities.
"Over the next two to three years, we anticipate that the volume of bank-held nonperforming mortgages will grow dramatically," Highfields co-founder and Senior Managing Director Jonathon Jacobson said. "PennyMac will be extraordinarily well positioned as both a buyer and servicer of these assets," he added.
Bank of America Corp (BAC.N) said it would acquire Countrywide for about $4 billion in stock after the nation's largest mortgage lender and servicer lost about $1.6 billion in the last six months of 2007 because rising defaults forced it to raise provisions to handle eventual losses.
New York-based BlackRock made the announcement on the same day it was tapped by the Federal Reserve Bank of New York to manage a roughly $30 billion portfolio of assets once owned by Bear Stearns. Both pieces of news helped send BlackRock's share price up as much as 12 percent. In early afternoon trading the share price was up 9.63 percent at $225.95 on the New York Stock Exchange.
(Reporting by Svea Herbst-Bayliss, editing by Richard Chang)
