The Wall Street Shysters and their puppets at the Federal Reserve blew up the American economy with their subprime mortgages and AAA rated derivatives in 2008. Now they are in the process of blowing up the American economy again with their fraudulent own to rent scheme designed to provoke a fake housing recovery, while they peddle more worthless rental revenue backed derivatives to dupes and dumbasses. What could possibly go wrong?
Homes’ Rental-backed Security Spike To 8.3% (Same as National Average)
Like the Dos Equis Beer commercial, I don’t always read Salon, but when I do it is an interesting article. Like the one pointed out to me by Jill, “One percent’s rental nightmare: How Wall Street scheme blew up in its face.”
I’ve followed the Wall Street rental scheme for some time. You know the basics by now: Big Money investors decided to buy up all the foreclosed properties their pals at the banks created during the financial crisis, and rent them out to many of the same people who lost their homes. Then, they started selling securities backed by the rental revenue, just like the mortgage-backed securities from the crisis. Profiting off their own failure: It was Wall Street’s perfect plan.
There was just one problem: turns out that institutional investors have no idea how to manage rental properties.
That has become clear through a series of new statistics from early investors, who regarded themselves as the trailblazers of a hot new asset class. For example, nobody has purchased more properties and converted them into rentals than Blackstone, holders of roughly 45,000 nationwide. Invitation Homes, a Blackstone subsidiary, issued the first rental-backed security last November, and just released its first of this year, 2014-SFR1, worth $1 billion and based on 6,537 properties in selected markets, including Phoenix, Atlanta, Sacramento, California, several parts of Florida and Riverside County, California. Yet while these areas have tight housing inventory, vacancies at the Invitation Homes properties have surged.
As of May 31, the vacancy rate for the homes in 2014-SFR1 stood at 7.3 percent, a 33 percent increase over the previous month. It’s not a fluke: Vacancy rates for Invitation Homes’ initial rental-backed security from last year have spiked to a higher-than-expected 8.3 percent.
Here is the rental vacancy rate for the US. It currently stands at 8.3%, just like Invitations Homes vacancy rate.
Hyperbole aside about the 1%, it does point to chink in the armor of the foreclosure recovery. And it gets back to the point that I have been discussing ad nauseum.
In order to have a recovery in housing (both owner and rental), the US needs household income and wage growth higher than it is currently experiencing.
Once again, we have an economy that has NOT recovered from the demolition of household income and average wage growth since 2007. THAT is the real problem.
From Nakedcapitalism:
“Securitizing Rentals
Wall Street’s rental empire is entirely new. The single-family rental industry used to be the bailiwick of small-time mom-and-pop operations. But what makes this moment unprecedented is the financial alchemy that Blackstone added. In November, after many months of hype, Blackstone released history’s first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstone’s competitors announced that they, too, would develop similar securities as soon as possible.
For Blackstone, at least, the logic is simple. The company wants money upfront to purchase more cheap, foreclosed homes before prices rise. So it’s joined forces with JP Morgan, Credit Suisse, and Deutsche Bank to bundle the rental payments of 3,207 single-family houses and sell this bond to investors with mortgages on the underlying houses offered as collateral. This is, of course, just a test case for what could become a whole new industry of rental-backed securities.
Many major Wall Street banks are involved in the deal, according to a copy of the private pitch documents Blackstone sent to potential investors on October 31st, which was reviewed by TomDispatch. Deutsche Bank, JP Morgan, and Credit Suisse are helping market the bond. Wells Fargo is the certificate administrator. Midland Loan Services, a subsidiary of PNC Bank, is the loan servicer. (By the way, Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank are all members of another clique: the list of banks foreclosing on the most families in 2013.)”
I can only hope that this causes such financial ruin that no one will ever attempt to do such things again. Housing must become affordable so that the people can actually have some income left over for school, vacations, etc. That we spend so much for housing is just plain immoral.
I hope these “investors” lose EVERYTHING.
You’re right, NickelthroweR. I like it.
Perhaps the failure of the banksters to turn poop into gold will force them to liquidate the untold numbers of homes they’ve been sitting on in the hopes values and demand would go up.
Nickel. …you’re kidding aren’t you……the too big to fail lose money…… Damn near spewed coffee on the monitor
I can only hope that this causes such financial ruin that no one will ever attempt to do such things again. -NT
You should do stand up comedy Nik.