REO to Rental & Securitization

in Real Estate
September 25th, 2012

The Wall Street Journal recently reported on the latest progress toward the securitization of single-family rental homes here. The WSJ has tracked this market development throughout the year, noting the birth of new investment firms and funds and explaining the investment strategy. The Federal Reserve’s January White Paper–covering current housing market data and a proposed government-supported Real-Estate-Owned to rental program–is a must read. The White Paper suggests that scale (gathering enough rental units) and financing (attracting loans from wary lenders) have dogged the rental securitization strategy, but the WSJ’s recent reports suggest that investors will quickly surmount those barriers.

It should come as no surprise that the market moves much faster than regulators, rating agencies, or commentators. A variety of firms now seek to capitalize on this new investment opportunity, with some giving nod to corporate social responsibility. This development should not be written off as Chapter Two of the mortgage-backed security bubble and bust. The academic and regulatory community should dig into the unique features of the single-family rental market and produce sound critique of this new securitization front.