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Hedge Funds Seek Cheap U.S. Housing With Soured Loans: Mortgages

After David Sherr left Lehman Brothers Holdings Inc. in 2007 to start a hedge fund, he considered buying delinquent mortgages to profit from the U.S. housing collapse. Following years of passing on the debt, he now sees the loans as one of the best ways to play the recovery.

Sherr’s One William Street Capital Management LP, a $2.7 billion investment firm, is starting a fund to buy non-performing loans, or NPLs, tied to delinquent borrowers who haven’t yet lost their homes to foreclosure, according to a letter to investors obtained by Bloomberg. NPLs are selling at 60 percent to 80 percent of estimated property values, the letter said, offering the “cleanest exposure” to housing.