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Treasury Urged to Bolster Performing Market.
Byline: Brian Collins
Washington-Treasury secretary Henry Paulson might consider buying performing mortgages, instead of nonperforming assets, as a way to increase liquidity and lending, according to a mortgage industry veteran.
Terry Couto, a partner in the consulting firm Newbold Advisors, says it is difficult today to convert loans into cash. "Bottom feeders are offering ridiculously low prices for nonperforming loans. It is now migrating over to performing loans as well," he said.
Banks might get only 70 cents on the dollar for a performing loan that should sell for 90 cents. If the government pays 85 cents, the bank could use the cash to cover the costs of servicing their nonperforming loans or increase their lending.
"There is a huge illiquidity premium out there today," Mr. Couto said in an interview.
The consultant served as the temporary chief financial officer for Countrywide's secondary marketing department from April through December of 2007.
Before starting Newbold Advisors two years ago, he worked as the CFO for several mortgage companies, including GE Capital Mortgage Services, Cherry Hill, N.J., in the late 1990s. He ran GE's special servicing shop and advises ...
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Source: HighBeam Research, Treasury Urged to Bolster Performing Market.