They’re doing it again, but instead of packaging up mortgages, they are buying the houses themselves and are creating derivatives based upon rent checks.
“No company has bought more houses than the Blackstone Group, one of the world’s largest private equity firms. (Its many investments include Hilton Hotels, the Weather Channel, and SeaWorld. Among its institutional investors are Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Deutsche Bank, and JPMorgan Chase.) Through its subsidiary, Invitation Homes, Blackstone has picked up houses through local brokers, at foreclosure auctions, and in bulk purchases. Last April, it bought 1,400 houses in Atlanta in a single day. In Phoenix, some neighborhoods have a Blackstone-owned home on just about every block. As of November, Blackstone had acquired 40,000 houses, most of them foreclosures, worth $7.5 billion. Today, it is the largest owner of single-family rental homes in the nation.”
“…Invitation Homes has described its strategy as “a bet on America.” Rather than pricing buyers out of the market, [Andrew Gallina, Invitation Homes’ vice president for marketing] says, the company is helping families who can’t get mortgages.”
So let me get this right: after destroying the housing market in the early 2000s, the Hedge Funders have bought up the houses themselves and in the process of buying up all these low-priced houses, they are forcing people into renting their properties, of which rent checks are then bundled into exotic derivatives, i.e., making bets that everyone will pay their rent on time.
What could possibly go wrong?
“But what if the security blows up? Investors could demand their collateral back, forcing renters out of their homes, even if they never missed a payment. “We could well end up in that situation where you get a lot of people getting evicted—not because the tenants have fallen behind, but because the landlords have fallen behind,” says [Dean Baker, an economist and co-director of the Center for Economic and Policy Research].”