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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsThe Empire Strikes Back: How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme -
http://www.commondreams.org/view/2013/11/26-5You can hardly turn on the television or open a newspaper without hearing about the nations impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.
Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Wall Streets foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: Its going to rent these foreclosed houses back to us. In the process, its devised a new form of securitization that could cause this whole plan to blow up -- again.
Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.
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The Empire Strikes Back: How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme - (Original Post)
xchrom
Nov 2013
OP
Joe Shlabotnik
(5,604 posts)1. Disaster capitalism keeps reinventing itself
From the article:
Wall Streets 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 historys first rated bond backed by securitized rental payments. And once investors tripped over themselves in a rush to get it, Blackstones 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 its 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.
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