The Legacy Securities Public-Private Investment Program (PPIP) undertaken by the government in an effort to stabilize the real estate market appears to be hitting pay dirt—for both investors and taxpayers.
According to the latest data released by the Treasury Department, Treasury's equity in the program, begun in 2009, has grown 27%. While $9 billion in federal funds are still at risk, the eight asset funds who took up the government's offer of low-cost loans to invest in troubled mortgage-backed securities have now accumulated, in aggregate, a total of $21.5 billion in commercial and residential mortgage-backed securities.
All eight funds made money by the end of 2010, even though almost half of the residential loans that make up 81% of the securities are Alt-A—loans to borrowers who usually have not disclosed either income or net worth. About 10% of the loans are subprime.
