Real Estate Portfolio Management of Defaulted Mortgage Debt

摘要

Portfolios of defaulted first and second lien mortgages are regularly sold to private equity and hedge funds for the purpose of resolution-ranging from traditional workouts to lump-sum or annuity payoffs. Burgeoning behavioral real estate techniques coupled with pressure from the Consumer Financial Protection Bureau (CFPB) are causing psychological concepts to increasingly be adapted by portfolio managers to improve the returns on these defaulted pools. In this paper, we document the practice of employing one such technique, the decoy effect. We discuss the many ways in which it can be applied to real estate portfolio management, its nuanced ethicality, and its efficacy in the face of increasing regulatory scrutiny.