A former Goldman Sachs Group executive who was a major player in the rise of the subprime mortgage market is reportedly seeking to raise at least $500 million to launch a new fund designed to buy foreclosed homes and turn them into rental properties.
Reuters, citing input from ‘seven people familiar with the matter’ – none of whom would agree to be publicly identified – reports that Donald Mullen's Fundamental REO Access fund began its marketing outreach ‘in earnest about a month ago.’ Reuters' sources claim that the new fund will pursue foreclosed homes in the southern states that are selling for between $70,000 and $190,000.
Mullen (pictured left) retired in January as the head of the credit and mortgage business inside Goldman's securities division, where he had exercised oversight on the company's subprime mortgage trades. Reuters says that Goldman Sachs is ‘"serving as the placement agent for the fund and will market it to wealthy investors, including some of its own clients.’ Neither Mullen nor Goldman Sachs would comment on the Reuters report.
Mullen's reported new endeavor is the latest effort by private equity entities to acquire foreclosed housing for turnaround as rental properties. Reuters notes that Blackstone Group LP has already spent more the $300 million to buy 2,000 foreclosed homes, while the asset management firm TCW has launched a new fund for this purpose and Kohlberg Kravis Roberts & Co. is partnering with Beazer Homes USA Inc. for a similar endeavor.