By Matthew Goldstein

Many cash-strapped, unemployed or underemployed people are still struggling with too much consumer and household debt. But there is one kind of debt that is getting smaller and smaller–mortgage bonds issued during the U.S. housing bubble by Wall Street banks and finance firms that isn’t guaranteed by either Fannie Mae of Freddie Mac.

The outstanding dollar value of  so-called private label residential mortgage bonds, or non-agency mortgage debt, is $909 million, according to stats compiled by CoreLogic and mutual fund firm Doubleline Capital. At its peak in July 2007, the total of private label mortgage debt was $2.2 trillion.

In July 2007, the financial crisis began in earnest as ever-so-late-to-game rating agencies began downgrading en massse a whole range of private label mortgage debt, much of which was backed by mortgages taken out by borrowers with either iffy credit histories or who put almost no money down for a home. As we all know the market for private mortgage debt shut-down and only now is beginning to show the first signs of coming to life–or green shoots as some might say.

For now, however, the issuance of private mortgage debt is just a trickle and represents roughly 2 percent of all new mortgage bonds brought to market. Mortgage debt issued with a guarantee from Fannie, Freddie, Ginnie Mae or FHA still accounts for all of the mortgage bond activity in the U.S.

Hedge fund reporter Katya Wachtel reported Thursday that the diminishing pool of private label mortgage is creating a quandry for hedge funds that specialize in mortgage debt. Those funds posted 20 percent or better returns by feasting on private label mortgage debt that kept rising in price all of last year both before and after the Federal Reserve, in September, began buying $45 billion of agency mortgage debt a month. The Feds move to keep interest rates low has pushed investors into riskier and better yielding assets, like private label mortgage debt.