
The man often referred to as the godfather of the
mortgage-backed security said a new breed of bonds
backed by (IORP) investor-owned rental properties carry no risk.
The statement came just after Mr. Lewis Ranieri
expressed regret that the (MBSM) mortgage-backed securities market imploded the way it did, bringing the US economy along with it.
According to Mr.Ranieri, the rental bonds
are different "because it's almost done like the
European covered bonds, because there's enough cash
flow and they can replace cash flow to pay the bonds,"
he said in an interview.
The chairman and founding partner of New York-based Mr.Ranieri Partners was an early advocate of the so-called (REO)-to-Rent (Real Estate
Owned-to-Rent) play.
Over the last three years, institutional investors have poured as much as $20 billion into purchasing foreclosed
properties, which they have turned around as single-family rental homes.
Blackstone, the largest player in the group, is about
to offer a new security backed by these homes.
Through its Invitation Homes program, Blackstone owns nearly 40,000 properties, according to recent statements from its chairman, Mr. Steve Schwartzman.
Securitizing the rental stream of these homes is the
next step for the new asset class. "It obviously
works.
It's one more version of taking the cash flows
off of a series of hard assets and securitizing them.
It works, and so I think they're good securities and
you'll see more of them," said Mr. Ranieri, who believes
there will be plenty of demand for the bonds. He did
admit that the private label mortgage-backed securities
market needs resuscitation.
One of his firms,Shell point Partners, was set to offer a major jumbo mortgage securitization deal last month.
It first delayed the deal, cutting its size, and then cancelled
it altogether. Mr. Ranieri said investor demand just isn't
there.
"The RMBS (residential mortgage-backed
security) market is still very fragile," he said.
"The damage that was done to it [has] not anywhere near been repaired. In fact, there are only a handful of buyers for the Triple-A tranches, where there used to be literally
hundreds and hundreds.
It's not dead, but it's certainly on oxygen." Mortgage credit remains extremely tight, as bankers are facing new mortgage regulations and lingering litigation left over from the mortgage crash.
Federal regulators continue to implement new restrictions designed to protect borrowers, but bankers say the pendulum has swung too far.
"Enough is enough," said David Stevens, CEO of
the Mortgage Bankers Association, to an audience of
more than 1,000 at the MBA's 100th annual convention in
Washington, DC. "The over correction and conflicting
policies that continue to come out of Washington DC. are
threatening not just this market, but they are threatening the recovery."