Securitizations of REO single family homes that have been converted to rentals could come as early as next year, according to Dash Robinson, managing director at Wells Fargo Securities.
Robinson spoke at the Oct. 11, American Securitization Forum, sunset seminar on REO to rental in Charlotte, N.C.
As far as what the debt structure will look like in the early 2013 deals, panelists speaking at the event said, it really depended on what the buyside felt worked best. "We need to craft the right cashflow waterfall, covenant and triggers that make sense," said Ryan Stark, director at Deutsche Bank who also spoke at the ASF event.
It also remains unclear what kind of financing might be available to potential investors. Freddie Mac has confirmed that it is exploring financing for the program, but panelists at the ASF event said that the GSE's plans have been put on hold because of concerns that it could crowd out private lenders.
The panelists noted that Fannie Mae and Freddie Mac are chartered to stimulate home ownership, not renting; and for that reason it is likely that the FHFA will hold up the Freddie Mac plan.
Buyers of REO properties will increasingly have the option to look for financing from banks and other financial institutions to fund acquisitions of REO rental packages, which is likely to come in the form of straight forward , traditional mezzanine financings.
On Sept. 17, Citigroup made a $65 million loan to Waypoint Real Estate Group for investments in distressed single-family houses converted to rentals. Waypoint Managing Director Gary Beasley told ASR that this type of balance sheet lending served as a precursor to executing securitization transactions.
Citi topped off that loan with a $245 million revolving credit facility for the renovation, long-term ownership and management of Waypoint’s growing national portfolio of single family rental, according to an Oct.3, Waypoint press release.