Fund manager Tom Forester, who was the only equity fund manager to make money in 2008 when the housing and financial crises rocked markets, says issues still lurk beneath the surface of the rebounding housing market.

While foreclosures and delinquencies have declined quite a bit, Forester tells Investor’s Business Daily that many foreclosed homes have been bought in recent years by hedge funds or wealthy investors, who wanted to rent out the properties to make money. But an oversupply of rental properties is curtailing their efforts. “Many hedge funds paid full price and more, leading to a price spurt,” Forester said. “Many of the early funds are getting out.”

Forester also says many home loans that have been reworked to create lower monthly payments are in trouble. “Most of those loans are likely to default within three years,” he said. And he says that rising interest rates have led to slowing refinancing activity, hurting lenders.

One lender that Forester does own: U.S. Bancorp. “We own (USB) because they have a strong balance sheet and good underwriting,” he said. “Loans in their portfolio don’t have credit problems. But their mortgage component is a (potential) head wind for them.”

Forester appears to have his Forester Value fund portfolio very defensively positioned, with healthcare and consumer staples being his two largest sector holdings at the end of the third quarter and about 25% of his portfolio in cash.