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Wall Street’s Hot New Financial Product: Your Rent Check

March 6, 2016

By Laura : motherjones – excerpt

Investment firms are playing landlord and bundling their rental homes into new securities. What could go wrong?

Toward the end of 2012, Mark Alston, a real estate broker in Los Angeles, began noticing something strange. Home prices were starting to rise, and fast—about 20 percent annually. Normally, higher home prices would signal increased demand from homebuyers and indicate that the economy was rebounding. But the home ownership rate was still dropping. Somehow, the real estate market was out of whack.

Then there were the buyers themselves. “I went two years without selling to a black family, and that wasn’t for lack of trying,” recalls Alston, whose business is concentrated in inner-city neighborhoods where the majority of residents are African American and Latino. Now all his buyers were businessmen in suits. And weirder yet, they were all paying in cash.

Over the last two years, private equity firms and hedge funds have amassed an unprecedented real estate empire, snapping up Spanish revivals in Phoenix, adobes in Los Angeles, Queen Anne Victorians in Atlanta, and brick-faced bungalows in Chicago. In total, Wall Street investors have bought more than 200,000 cheap, mostly foreclosed houses in some of the cities hardest hit by the economic meltdown. But they’re not simply flipping these houses. Instead, they’ve started bundling some of them into a new kind of financial product that could blow up the housing market all over again…

Asked why the public should expect rental-backed securities to be safe, the hedge fund investor responds, “Trust me.”

“It’s just like a residential mortgage-backed security,” says one hedge fund investor whose company does business with Blackstone. Yet some analysts and observers are uneasy about the idea of a new market for securitized mortgage debt backed by rent checks…

A longer version of this article was previously published by TomDispatch...(more)

Cynk Uygur : The Young Turks

Tom Hartman: The Progressive Voice agrees with the Young Turks…

3 Comments leave one →
  1. March 6, 2016 12:17 am


    Now you know who the “all cash buyers” are and why they are buying up property in big cities across the US. The value of the property is inconsequential. The real money is coming from the derivatives being sold on Wallstreet.


  2. mona permalink
    March 6, 2016 7:02 am

    maybe, but he hasn’t changed his brand name, like blackwater, or received a bailout. Bankruptcies have to be part of the system. I agree with greg hunter, it’s “we the people vs. the criminal crony class”.



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