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Hedge fund turns Fannie Mae junk into CDO-like securities

Packaged into US$118m of new bonds, the sale allows Bayview Financial to borrow against its investments in mortgage debt

The notes look simpler and more transparent than CDOs, said Prof Sanders at George Mason University. But their performance could depend a good deal on the housing market and whether prices fall. 

New York

A FLORIDA hedge fund has transformed risky Fannie Mae and Freddie Mac debt into investment-grade securities, and it could end up helping the mortgage giants' efforts to offload more of their risk.

Bayview Financial packaged junk-rated securities issued by the two...

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