US asset manager BlackRock is talking to mortgage servicing companies about a possible acquisition to give it better control over its investments in housing loans, Financial News reports.
“If you are going to invest in sub-prime mortgages, the only way to control the underlying asset is to be a servicer,” says Larry Fink, chief executive of BlackRock.
Fink was involved in some of the earliest mortgage securitisations in the 1980s when he was a bond trader at investment bank First Boston.
Fink said BlackRock decided to back away from new sub-prime investments in 2005 and so has little exposure to troubled 2006-vintage sub-prime mortgages.
BlackRock’s move is defensive amid a mortgage market that is staggering from the problems with sub-prime. Fink said the problems are localised: “There’s a robust corporate bond market. The problem is in mortgage credit and money market mortgage credit.”