Mortgage-Securities Revival Proves Elusive

Wall Street Journal (06/23/08) P. C2; Bryan-Low, Cassell; Mollenkamp, Colleen
In the last several months, numerous hedge funds have been dabbling in down-and-out securities linked to the fate of U.S. homeowners, most notably bonds backed by subprime mortgages. Economists and legislators are keeping a close eye on their moves, believing they can play an important part in ending the turmoil that has weighed down the nation's financial markets. To date, however, these funds have had little success in attracting investors, as placing a value on mortgage securities in these uncertain times continues to be complicated. Nevertheless, the case to buy remains compelling, with the prices of highly rated subprime-backed securities having plunged nearly 40 percent on average since the credit crisis took hold in the summer of 2007.