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Pimco and Hedge Funds Are Still Fighting Over Subprime Scraps

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Eight years after the bottom fell out of the U.S. housing market, investment giants including BlackRock Inc. are facing off against small hedge funds over the detritus of the subprime era.

The issue: When does it stop making sense to keep struggling subprime borrowers in their homes? The hedge fund faction is better off when loan terms are modified. The BlackRock camp could potentially profit more when banks foreclose.