“Large numbers of displaced homeowners who have defaulted on their mortgages have no choice but to rent”

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Foreclosure-rental bonds come to market without ratings

Aug 24 (IFR) – The first so-called real estate owned (REO)-to-rental securitizations in the United States may go ahead without credit ratings, as agencies ponder how to assign grades to the new and potentially risky products.

In the planned deals, real estate and private equity investors would buy up blocks of foreclosed properties and rent them out to borrowers who have been displaced due to their unpaid mortgages. The rental payment streams – and possibly the proceeds from an eventual sale of the properties – would provide payments to bond investors.

“There are unrated deals in the works,” said Suzanne Mistretta, a senior director at Fitch.

“Right now investor demand is focused on short-term [two years or less] unrated offerings, but by next year, we could be presented with a new rated transaction. Beyond a two-year average life, investors may want a rating.”

Over the past three months, Fitch, S&P, DBRS and Morningstar have each published initial assessments of the potential risks of the new asset class. But no agency has yet published official criteria for the product.

Rest here…

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4closureFraud.org