Single Family Rental Securitization Market Growing

A relatively new type of mortgage security that bundles residential and commercial loans is gaining popularity with investors, according to a recent article in Pensions & Investments. Morningstar Credit Ratings, which has rated all single family rental securitizations totaling $14.29 billion in issuance, explain these bonds are analyzed differently from RMBS as they are rated according to whether the total rents collected exceed the mortgages.

In the aftermath of the crisis, investment managers began buying foreclosed homes, renovating them and renting them out, the article explains, and some of these portfolios have been spun out into real estate investment trusts. According to Marc Rosenthal of MatlinPatterson Global Advisers LLC, the move by money managers to buy single-family homes to rent “was a huge savior for the subprime residential market in 2012 to 2013… Those investors bought property with cash and were able to get the (portfolio of single-family homes) cash flowing, and now they are securitizing the rental cash flows.”

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