Famed shortseller John Paulson, who earned one of Wall Street’s biggest paydays betting on the collapse of mortgage-backed bonds, is following that with a bet that he can recoup millions more from lenders that sold the soured securities.
Paulson & Co. has acquired the right through bankrupt mortgage company ResCap to sue banks and others that sold faulty mortgages in the run-up to the financial crisis in 2007 and 2008, The Post has learned.
The hedge fund has amassed a “significant” minority position in ResCap Liquidating Trust, which, since December has filed suits claiming $9 billion in mortgage loan losses, according to sources.
Paulson & Co. also holds one seat on the five-member board of the trust, which is tasked with unwinding what remains of the defunct mortgage company.
Recently. the trust has asked a state court judge to move some of its suits to bankruptcy court. If successful, the trust could get a quicker resolution — and recovery.
The ResCap trust could recover anywhere from 10 percent to 40 percent of the $9 billion in claims — with damages ranging from $900 million to as high as $3.6 billion, sources estimated.
“If I was a betting person, I’d say Paulson will make money,” a source said.
Paulson famously made $4.9 billion by using credit default swaps to short the subprime mortgage market.
Paulson & Co. boosted its position in the trust by acquiring mortgage insurer MBIA’s stake for roughly $8 a share. A 40-percent recovery would be equal to about $32 per share, a source said.
The hedge fund initially acquired much of ResCap’s stake in the liquidating trust in exchange for forgiving unsecured debt. In December, MBIA sold its stake to Paulson to raise cash, sources said.
ResCap filed for bankruptcy in May 2012 under mounting loan losses and a flood of lawsuits from investors demanding that the unit buy back billions in bad mortgages.
ResCap — which bought roughly half the mortgages it serviced from banks and others — has paid out $12 billion to settle claims. In turn, the trust for the defunct company is now suing those that sold it toxic mortgage.
In the suits, ResCap claims that banks and other firms, including PNC Financial Services and SunTrust, promised to cover any mortgage loan losses, sources said.
Paulson, MBIA, PNC and SunTrust declined to comment.