Checking In on Real Estate Funds

It's a natural time to put a spotlight on funds in the real estate sector.

Foreclosures abound, as homeowners walk away from properties whose values have imploded from their purchase price. The Mortgage Bankers Association reported year-end 2007 foreclosures at an all-time high and late payments at a 23-year high.

Real estate investment trusts, or REITs, and real-estate-focused financial firms that borrow money to buy income producing properties or mortgage-backed securities are teaching a risk-averse public the meaning of the term "margin call."

Carlyle Capital borrowed $32 for every dollar of equity capital to buy $22 billion in mortgage debt. When the value of its collateral went south, its Wall Street bankers issues a margin call to put up more money. ...