As the largest mortgage lender in the United States, many believe Countrywide Financial helped fuel the subprime mortgage mess with its no-holds-barred approach to mortgage lending. Now a group of former Countrywide executives are looking for a new way to get paid: buy distressed mortgages at rock-bottom prices and resell them for a pretty penny.
On Monday investment management firms BlackRock (nyse: BLK – news – people ) and Highfields Capital Management announced they are funding the venture, which will be called Private National Mortgage Acceptance and will be run by Stanford Kurland, a 27-year veteran of Countrywide Financial (nyse: CFC – news – people ). Kurland served as president and chief operating officer at the lender through 2006.
Private National Mortgage, also known as PennyMac, will invest in and service resident mortgages with capital raised from private investors. The aim is to avoid home foreclosures and restructure loans so borrowers can maintain payments and stay in their homes.
PennyMac will acquire loans from financial institutions seeking to reduce their mortgage exposure. BlackRock Chief Executive Officer Laurence D. Fink said PennyMac is looking to bring “patient capital to the unprecedented distress in residential mortgages.”
Highfields Co-Founder Jonathon S. Jacobson said although there has been significant attention on write-downs of mortgage-related losses, “whole loan losses have barely begun to materialize.” But Jacobson expects losses to soar over the next two to three years. “PennyMac will be extraordinarily well positioned as both a buyer and servicer of these assets,” Jacobson said.
Meanwhile, some criticize the fact that executives from a company facing probes by the Federal Bureau of Investigation for securities fraud, as well as lawsuits and regulatory questioning, can profit from a downturn in the mortgage market it helped to create. (See “ Countrywide’s New Bad News”)
David Spector, the former co-head of global residential mortgages for Morgan Stanley, will be chief investment officer of Pennymac. The firm’s operations will be based in Calabasas, Calif., headquarters of Countrywide.