Case | HBS Case Collection | December 2008 (Revised March 2009)

Rosetree Mortgage Opportunity Fund

by Victoria Ivashina and Andre F. Perold

Abstract

In December 2008, in the midst of the worst financial crisis since the Great Depression, Rosetree Capital Management was evaluating the purchase of a pool of U.S. residential mortgages. The firm had formed an investment vehicle to acquire troubled residential mortgages from banks and other motivated sellers. The idea was to purchase mortgage loans at a discount and to work with individual borrowers to restructure their debts. Performing mortgages could then potentially be resold in the secondary market. The case provides cash flow projections in various economic scenarios that are revealing of the economics of troubled mortgages and home foreclosure. Rosetree needed to decide whether and how much to bid for the loans.

Keywords: Financial Crisis; Borrowing and Debt; Mortgages; Investment; Housing; Valuation; United States;

Citation:

Ivashina, Victoria, and Andre F. Perold. "Rosetree Mortgage Opportunity Fund." Harvard Business School Case 209-088, December 2008. (Revised March 2009.)