RISES in housing prices have been profitable to private equity firms and institutional investors that bought foreclosed homes to flip them or to rent them out. Now the recovery in housing is fuelling a niche market for newly minted bonds that are backed by the most troubled mortgages of them all: those on homes on the verge of foreclosure.
And it is not just vulture hedge funds swooping in to try to pluck the last remaining gold from the ashes of the housing crisis. The investors making money off these obscure bonds - none are rated by a major credit rating agency - include American mutual funds. And one of the biggest sellers of severely delinquent mortgages to investors is a US government housing...
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