Rental Backed Securities Are Here: Two Major Wall Street Firms Are In Detailed Discussions To Create And Sell The World’s First Bond Backed By Home-Rental Payments
Here We Go Again: Step Aside RMBS, Rent-Backed Securities Are Here, And With Them The Beginning Of The End
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.
Why worry? Remember it was only 2007 when everyone said, especially the Fed Chairman Bernanke, that housing prices are unlikely to ever go down. Actually, forget we just said that. What is important is that it is now 2013, and rental payment are unlikely to ever go down!
…There is more, but the gist is clear enough that we hardly need to point it out.
Or maybe we do: securitization marked the peak of the last housing bubble. If the Blackstone deal indeed comes to market and prices, and is followed by many more, the end of the second credit and housing bubble is now, mercifully, in plain sight, which for those sick and tired of centrally-planned and manipulated markets is actually good news: the faster this artificial house of cards crashes and burns, the better, so if Blackstone wants to dump its housing exposure to the biggest idiot, more power to it.
And expounding on what we just said in the last sentence: Blackstone – America’s largest landlord – is now actively selling its housing exposure, whether with the assistance of Goldman’s Fab Tourre, Paulson’s Paolo Pellegrini, or… Deutsche Bank’s own Greg Lippmann.
Furthermore, if it is selling, it means there will be active buyers on the other side who will soon be the shorts of the year, just like AIG and it idiot peers were in 2006 and 2007. Which is good news for all those shorters who have been dormant for the past 3-4 years when Bernanke onboarded all the credit risk personally. After all, it was not for naught that the TBAC said it desperately needs the return of securitization for Bernanke to be able to slowly step away from monetizing everything. This deal will be precisely the canary in the coalmine to decide if Bernanke can, indeed, finally step aside.
Finally, for those who have been on the fence about whether or not to sell their house, this is your warning sign. When the biggest housing bull starts selling, run for the proverbial hills.
Blackstone Preparing to Unleash a Flood of Real-Estate Selling
For years Blackstone GroupBX -0.74% has been one of the world’s biggest buyers of real estate. With its securities filing on Thursday outlining plans to take its retail-property company public, the private-equity firm begins a phase where it is likely to be one of the biggest sellers, too.
Blackstone raised more than $24 billion from its last two real-estate funds, the most ever raised for funds of this kind. Most of that money has been invested or committed to every sort of real estate available — from suburban U.S. office buildings to distressed European property debt to single-family homes in Florida.
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