Posts (RSS)Ex-Wall Street Execs Earning from Foreclosed Home Listings
Some Wall Street institutions have been criticized by many housing analysts and consumer advocates for their role in the subprime lending crisis that led to the national economic downturn and the growth of foreclosed home listings.
Nowadays, some executives who made deals on Wall Street are leaving their comfortable offices to make money from foreclosed home listings.
Three of these are Matthew Cooleen, formerly of Deutsche Bank; Laurence Pelosi, from Morgan Stanley; and Paul Staley, from Fortress Investment Group.
Cooleen, who handled mortgage-backed securities and credit derivatives at Deutsche Bank, has been purchasing properties in bulk from foreclosed home listings. With millions in ready cash for home purchases, he has already acquired $30 million worth of foreclosure homes in Nevada, California, Florida and Arizona through his Connecticut investment firm HudsonCross Financial.
Cooleen continues to explore foreclosure-battered cities looking for foreclosed home listings from where he could buy groups of ten to 200 distressed homes. He prefers buying in bulk because of the discounts that he gets from banks and other lenders.
He added however that only about 40 percent of the lenders he has negotiated with are willing to sell in bulk. The others prefer to sell their foreclosed homes to individual buyers so they can raise their prices.
Cooleen argued that if banks sell their properties in bulk, they can more quickly clear their repo homes inventories and help the housing sector recover.
Staley, meanwhile, learned from what he was doing as an executive of Fortress Investment. At Fortress, he purchased properties from foreclosed home listings. Later, he joined McKinley Partners which was starting to buy foreclosed houses in California.
Pelosi was also already involved in housing when he was working with Morgan Stanley. His job was to help close large-capital land and housing projects for the firm. He also later joined McKinley early this year.
McKinley is set to buy four houses in Pittsburgh, a small city in California. One of the houses it bought for only $84,000 was worth $412,000 in 2005. It will rent out the house for up to $1,200 and then sell it when the housing market improves. It also expects to earn around 5 to 7 percent from the rent.
McKinley has money to buy some more from foreclosed home listings. In addition, it also has financial backing from Oakland-based One California Bank, which committed to finance 50 percent of their purchases.
According to Barclays Capital, there are about 765,000 houses in foreclosed home listings nationwide as of the end of the first week of April. It expects the inventory to rise to around 1.3 million houses in 2010.