Friday, May 23, 2008

Ranieri Pursuing $1 Billion Distressed Mortgage Fund

(Housing Wire) Lewis Ranieri, the mortgage-backed bond market pioneer that made headlines earlier this week for his involvement in troubled Franklin Bank Corp., is the latest to jump into the distressed mortgage space with news Friday that a fund he manages has been seeking to raise $1 billion in fresh capital.

Selene Residential Mortgage Opportunity Fund LP, which counts Ranieri among its managing partners, has raised just $151 million so from investors in New York, Ohio and Pennsylvania as of April 15, according to a report published by Bloomberg News.

Further research by Housing Wire shows that the $28 billion South Carolina Retirement System, a pension fund, also invested $200 million with Selene earlier this month. The fund is one of the few U.S. pensions with permission to invest in alternative funds.

From Bloomberg:

“Our plan is to raise $1 billion and buy delinquent mortgages that we will recast and refinance and try to keep the borrower in the house without a foreclosure,” said David Creamer, a Selene managing partner and former GMAC executive, in an interview.

Interestingly, Ranieri seems, if anything, to be late to the distressed mortgage asset party. Other large players have been aggressively attempting to stake out positions in distressed mortgages since earlier in the first quarter of this year.

BlackRock Inc. (BLK: 207.35, +1.96%), the biggest publicly traded U.S. asset manager, said in March it was backing a new company called Private National Mortgage Acceptance Co. LLC, also known as PennyMac, that will buy mortgages at a discount and look to make money in the so-called scratch-and-dent business. PennyMac has a $2 billion war chest to step in and start buying, and will bankroll its own in-house servicing platform; BlackRock also recently negotiated a deal to snap up $15 billion in mortgages from Swiss bank UBS AG (UBS: 29.13, -2.61%).

Beyond BlackRock’s move, Marathon Asset Management, LLC, a global investment manager with $10.6 billion under management and over $20 billion in assets, is also buying up distressed mortgages and is also pumping the mortgages it buys to its own captive servicing operation, Phoenix-based Marix Servicing, LLC. The company has said in recent weeks that it has been buying well over a billion dollars in bad mortgages for the platform to service.

Selene snapped up the mortgage servicing platform of bankrupt Aegis Mortgage Co., a former Cerberus Capital Management LLC venture that went belly-up in August last year.

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