Former executives from Countrywide Financial, the US sub-prime mortgage lender, have set up a new venture aiming to profit from the bursting of the housing bubble that their old firm is blamed for helping to create.
A team led by former Countrywide president Stanford Kurland unveiled Private National Mortgage Acceptance Co – PennyMac for short – which will buy up loans whose borrowers have got into financial difficulties.
With mortgage arrears at record levels across the US after millions took on loans that they could not afford, many of the banks that lent to them are facing financial strain. While many home loans were packaged into mortgage-backed securities and other derivatives whose collapse in value has caused chaos in global financial markets, many still reside on the books at the issuing banks. Ben Bernanke, chairman of the Federal Reserve, warned last month that some regional banks are likely to go bust.
PennyMac hopes to benefit from expected fire sales by distressed banks. Mr Kurland said it will work with borrowers to refinance the loans, helping to avoid foreclosure and making the loan more valuable so that it can sell it on at a profit. The company will "work to help both lenders and borrowers, as one step in addressing the US mortgage crisis," he said.
The $2bn venture is being part-funded by BlackRock, the giant fund manager which is itself half-owned by Merrill Lynch, one of the Wall Street institutions worst hit by the credit crisis.
Most senior executives at PennyMac are Countrywide veterans. Mr Kurland spent 27 years with the business before leaving in 2006. He will be chairman and chief executive, with James Furash, founder of Countrywide's banking subsidiary, as chief development officer. David Spector, chief investment officer, is a former head of secondary markets at Countrywide and is a former head of global mortgage trading at Morgan Stanley in London.