Morning Must-Read: David Dayen: “Just 30’s-Era HOLC Stuff, Which Tim Geithner Called ‘Unicorny'”

David Dayen: “Hedge funds figured out u can buy troubled mortgage funds at huge discount…

…restructure loans, keep people in homesThey’re basically just doing 30’s era-HOLC stuff, which Geithner called “unicorny.” This could have been done to scale.

Matthew Goldstein: http://dealbook.nytimes.com/2014/04/30/troubled-mortgage-funds-on-rise-but-face-headwinds/ In the world of hedge funds, distressed mortgage funds are suddenly hot…. Donald R. Mullen Jr., the manager of Goldman Sachs’s subprime mortgage trade during the housing bubble, is raising $1 billion for a fund to be managed by his investment firm, Pretium Partners. Deepak Narula’s Metacapital Management also plans to start a fund to invest in delinquent mortgages…. The hedge funds Ellington Management Group, One William Street Capital and Angelo, Gordon & Company are either already in the market or planning their own funds. Other institutional investors that are active in the so-called nonperforming loan market include the Blackstone Group, Oaktree Capital and Lone Star Funds. Bloomberg News first reported about Metacapital, which has traditionally invested in mortgage securities and a few years ago was one of the top-performing hedge funds, moving into home loans. The appeal of the distressed mortgage market is understandable for managers looking to generate above-normal returns for their wealthy investors. Even though home prices have rebounded some in many areas hardest hit by the housing bust, there are still more than four million loans on which borrowers are delinquent. Hedge fund managers are wagering that after buying some of these troubled home loans at a substantial discount, they can reach an agreement to restructure the loans in a way that allows borrowers to resume payments — generating sufficient cash flow and decent returns…