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First American Mortgage Funds is managed by U.S. Bancorp (NYSE:USB). which has a sub-investment agreement with Nuveen Asset management. These are leveraged closed end funds and are all listed on the New York Stock Exchange. Although similar in nature, each fund is different in composition and quality. They have a mixed history and do sell at substantial discounts.

AMERICAN STRATEGIC INCOME PORTFOLIO (NYSE:ASP)

As of November 15, 2011, ASP sold at a 15.74% discount from net asset value. As of August 31, 2011 it had gross assets of $ 71,151,954 of which $18,416,391 consisted of borrowed funds. Its major assets were as follows:

PORTFOLIO COMPOSITION

COMMERCIAL LOANS 37.3%
MULTIFAMILY LOANS 10.7%
FIXED RATE CORPORATE NOTES 6.8%
U.S. AGENCY MORTGAGE BACKED SECURITIES 15.9%
COMMERCIAL MORTGAGE BACKED SECURITIES 29.2%
REIT PREFERRED STOCKS 32.5%

As of August 31, 2011, ASP had accumulated capital losses of $ 711,289 and unrealized appreciation of $ 4,800,033.

Multifamily and commercial loans were 92.1% current with 7.9% being more than 120 days delinquent. Its loan portfolio was concentrated in the following states:

GEOGRAPHIC DISTRIBUTION

TEXAS 22%
CALIFORNIA 13%
NEW MEXICO 12%
COLORADO 12%
MINNESOTA 10%

U.S. Bancorp (USB) and Nuveen are careful to avoid lawsuits by marking down the fair value of bad loans. The discount in excess of 15% adds an additional cushion. When you consider that, including single family loans, 48.7% of ASP's portfolio is in whole loans, the discount acts as an additional 30% cushion with respect to whole loans.

For the year ending August 31, 2011, ASP had investment income of 6.18% with a 13% portfolio turnover.

AMERICAN STRATEGIC INCOME PORTFOLIO II (NYSE:BSP)

As of November 15, 2011, BSP sold at a 18.79% discount from net asset value. As of August 31, 2011, it had gross assets of $ 229,664,237 of which $ 70,048,888 consisted of borrowed funds. Its major assets were as follows:

PORTFOLIO COMPOSITION

COMMERCIAL LOANS 41.7%
MULTIFAMILY LOANS 39.4%
FIXED RATE CORPORATE NOTES 13.6%
U.S. AGENCY MORTGAGE BACKED SECURITIES 9.8%
COMMERCIAL MORTGAGE BACKED SECURITIES 18.1%
REIT PREFERRED STOCKS 20.1%

As of August 31, 2011, BSP had accumulated capital losses of $ 9,272,182 and unrealized depreciation of $ 18,845,558.

Single family loans, which is only 0.1% of its portfolio, had 58.3% of its loan portfolio being delinquent by 60 days. BSP's multifamily and commercial loan portfolio was 83.6% current with 5.4% being 30 days delinquent, 3.4% being 90 days delinquent and 7.6% being over 120 days delinquent.

The loan portfolio was concentrated in the following states:

GEOGRAPHIC DISTRIBUTION

FLORIDA 24%
TEXAS 15%
VIRGINIA 9%
WASHINGTON 8%
OREGON 6%
GEORGIA 5%

The discount of 18% does act as an additional cushion to the written down value of its portfolio of which 81.2% consist of whole loans. The unrealized depreciation and capital losses also act as a benefit for future gains.

For the year ended August 31, 2011, BSP had investment income of 5.6% with a 10% portfolio turnover.

AMERICAN STRATEGIC INCOME PORTFOLIO III (NYSE:CSP)

As of November 15, 2011, CSP sold at a 19.22% discount from net asset value. As of August 31, 2011, it had gross assets of $ 257,438,905 of which $77,393,212 consisted of borrowed funds. Its major assets were as follows:

PORTFOLIO COMPOSITION

COMMERCIAL LOANS 57.8%
MULTIFAMILY LOANS 30.8%
FIXED INCOME CORPORATE NOTES 11.7%
U.S. AGENCY MORTGAGE BACKED SECURITIES 11.7%
COMMERCIAL MORTGAGE BACKED SECURITIES 5.8%
REIT PREFERRED STOCKS 22.4%

As of August 31, 2011, CSP had accumulated capital losses of $ 22,258,806 and unrealized depreciation of $ 34,906,719. CSP also had other accumulated losses of $ 2,424,378.

19.9% of its multifamily and commercial whole loan portfolio was more than 120 days delinquent. Its loan portfolio was concentrated in the following states:

GEOGRAPHIC DISTRIBUTION

ARIZONA 26%
TEXAS 25%
NEBRASKA 8%
FLORIDA 8%
MICHIGAN 7%

The bad loans have been written down and the discount is approaching 20%. This does provide some additional cushion, even though 81.2 % of its portfolio is in whole loans, with almost 20% being over 120 days delinquent. The capital loss carry forward and unrealized depreciation does offer some opportunity for a tax free ride in the future.

For the year ending August 31, 2011, CSP had investment income of 5.23% on net assets with a 13% portfolio turnover.

AMERICAN SELECT PORTFOLIO (NYSE:SLA)

As of November 15, 2011, SLA sold at a 13.63% discount from net asset value. As of August 31, 2011, SLA had gross assets of $ 175,598,698 of which $ 52,612,809 consisted of borrowed funds. Its major assets were as follows:

PORTFOLIO COMPOSITION

COMMERCIAL LOANS 50.8%
MULTIFAMILY LOANS 21.8%
FIXED INCOME CORPORATE NOTES 13.7%
U.S. AGENCY MORTGAGE BACKED SECURITIES 11.3%
COMMERCIAL MORTGAGE BACKED SECURITIES 17.6%
REIT PREFERRED STOCKS 11%

As of August 31, 2011, SLA had accumulated capital losses of $ 4,221,444 and unrealized depreciation of $ 2,236,764 and other losses of $ 570,180.

Whole loans were 88.7% current with 6.1% being more than 120 days delinquent. The loan portfolio was concentrated in the following states:

GEOGRAPHIC DISTRIBUTION

TEXAS 22%
ARIZONA 14%
WASHINGTON 13%
MINNESOTA 11%
OKLAHOMA 11%

72.6% of the portfolio is in whole loans, with the discount of 13.63% adding a cushion to the mark down of assets to fair market value. This is particularly assuring as only 6.1% of the whole loan portfolio is delinquent more than 120 days.

For the year ending August 31, 2011, SLA had investment income of 6.68% with total portfolio turnover of 10%

CONCLUSION

I would not put all my money in these funds, but they are worth a shot. I would buy the entire package, accumulating each separately whenever the discounts spiked. There can be no assurances but they are appealing with their discounts and loss carry forwards. They should be part of a fixed income portfolio that is balanced with more credit worthy investments.

Source: 4 Mortgage Income Funds Worth Considering