Group Sees Possible Big Boost for MBS Prices

In the long term, the proposed RTC-like government entity slated to buy illiquid assets appears likely to produce fundamentals that may boost mortgage-backed securities prices dramatically, according to a group that has managed investments in distressed residential MBS since late last year. The management group of Team Nation Investment Group LLC, Irvine, Calif., said they do not expect to see a significant change in MBS pricing in the short term. But even before official plans were made for the Resolution Trust Corp.-like entity, they said they were able to produce an average 31.6% return on investment on their distressed RMBS holdings since November 2007. Several market participants have shown concern about the integrity of MBS in the wake of greater-than-expected losses that have shaken the confidence of the financial markets at large. But Team Nation Investment Group fund manager Craig Chang said he believes that "with the recent government action, it further justifies that MBS are an instrument that the government believes is as important to our economy as the U.S. dollar -- it is a part of our lives."