Dow Jones reports that hedge fund managers are looking to snatch up mortgage portfolios in New Orleans. This is in anticipation of a resurgence in property values aided by federal grants to the hurricane-stricken region.
Homeowners in the area, notably those financed by sub-prime loans, may be unable or unwilling to honor their mortgages. Hedge funds are getting ready to reap the rewards by buying these assets from regional banks or loan companies.
One hedge fund manager in the Southeast, who chose to remain anonymous, is currently putting together a fund to invest in the region's distressed mortgage debt. The manager also went on to say that the competition is great for distressed mortgages with other hedge funds getting ready to move in on New Orleans real estate.
Others noted, however, that with a large portion of the city still under water and with the damage yet to be assessed, the long-term economic situation remains unsure.
Legal obstacles are another concern, notes John Burchett, chief executive at Hanover Capital Mortgage Holdings.
"Economically it is hard to determine where the values are going to be--there is too much uncertainty," he told Dow Jones. He stated there are those hedge funds that may be reluctant to enter the New Orleans property market fearing that they will be viewed as profiting from the misfortune of the hurricane victims.
"It's not the right thing for us to be doing," he added.