And here's today's news via ZeroHedge:
Here We Go Again: Step Aside RMBS, Rent-Backed Securities Are Here, And With Them The Beginning Of The End
Earlier today, when we reported that median asking rents in the US had just hit an all time high, we had a thought: how long until the hedge funds that also double down as landlords decide to bypass the simple collection the rental cash flows, and instead collateralize the actual underlying "securities"? One look at the chart below - which compares the median asking "for sale" price in black and the median rent in red - shows why.
The last time there was a great divergence (to the benefit of housing), Wall Street spawned an entire Residential Mortgage-Backed Securities industry where Paulson, Goldman willing sellers would package mortgages, often-times synthetically, slice them up in tranches of assorted riskiness, and sell them to willing idiots yield-starved buyers. As everyone knows, that particular securitization bubble ended with the bankruptcy of Lehman, the bailout of AIG and the near collapse of the financial system. As it turns out, the answer to our original question was "a few hours" because securitizations are back, baby, and this time they are scarier and riskier than ever.
It appears that since America's financially innovative elite doesn't have the patience to wait until housing prices regain their previous all time highs in order to usher in the second great RMBS wave, they looked long and hard at the chart above, and especially the red rental line, and came up with a brilliant idea: "Hey, let's just securitize rents."
Sadly, we are not kidding. The WSJ reports:
Two major Wall Street firms are in detailed discussions to create and sell the world's first bond backed by home-rental payments, people familiar with the matter say.
Blackstone Group LP is in negotiations to bundle monthly rental payments on around 1,500 to 1,700 of its homes. The private-equity giant is among the firms that have spent billions buying homes out of foreclosure, an investment strategy that has helped to bolster demand and strengthen the U.S. housing market.
The bond comprised of the Blackstone homes would be structured and marketed to investors by Deutsche Bank AG, the people say....MORE