Thread: Hedge Funds Bet Big on Massive Foreclosures

Hedge Funds Bet Big on Massive Foreclosures

A major hedge fund may have attempted to manipulate the housing market by funding a consumer advocacy group whose work would potentially help the fund’s positions in the market.

Shorting subprime mortgage-backed securities proved to be the winning ticket for Paulson & Co. which quadrupled its assets to $29 billion and became one of the 10 largest hedge funds last year.

The fund’s bets against subprime mortgages pay off only if lenders with defaulted don’t recoup losses through foreclosure sales.

Paulson donated $15 million to the Center for Responsible Lending (CRL).

Coincidently, that group has led the push for bankruptcy reform that would further reduce subprime mortgage values — which would directly benefit any investor in Paulson’s position.

The CRL has pushed Congress to allow bankruptcy judges to erase mortgage debt if it exceeds the home’s value, allowing what lenders call "cramdownsâ€

[quote="AirborneSapper7"]"The hedge funds have bet that Americans will lose their homesâ€