Just when they couldn't go lower, here we go!!!!

 NONE OTHER THAN THE KING OF FORECLOSURES HEADING THE PACK DEUTSCHE ( DOUCHE) BANK- BUYERS BEWARE- THIS BANK WILL RUIN YOU AND YOUR FUTURES! FRAUD.. FRAUD.. FRAUD.. WHY IS THIS BANK STILL IN OUR COUNTRY!!!!

 

Be Ready for Renter-Backed Bonds and Meet the Beneficiaries

 

NEW YORK (TheStreet) -- Just when I thought that nothing could be more perilous than mortgage-backed-securities (MBS) a couple of market mavens are ready to hatch something new.

DeutscheBank (DB_) may be the financial entity that will structure and sell this new breed of bond. What is this new product anyway?
This will sound familiar, but for the first time in U.S. history a well-known private equity firm is thinking about bundling monthly rental payments from upwards of 1,700 rental homes it owns and selling them to investors as "securities."

Which firm is considering this brilliant idea? BlackstoneGroup (BX_), the publicly-traded money manager which I recently wrote a story about is one of the master-minds.
Besides private equity BlackstoneGroup invests in real estate, hedge funds and high-yielding credit funds. It buys when everyone else is selling with the biggest profits coming from its private equity and real estate holdings.
Over the past few years it's been accumulating thousands of houses that BlackstoneGroup then converts to rentals. Many of these houses were in foreclosure and purchased at low pricing so the rent covers the usual costs of ownership such as property taxes, maintenance and management.
Analysts who remember the recent mortgage debacle and the impact it had on MBS values are understandably gun shy. There is little information if any on how reliable rental payments are for this latest breed of debt instruments.
Questions abound about vacancy rates, turnover and whether renters have a reliable long-term record of paying the monthly rent on time. This data is critical in determining the safety of what I'm calling "renter-backed securities" (RBS).
The details of the deal with Deutsche Bank are sketchy but the first tranche may be in the $250 million range. Indications are the structure will be like the multi-layered residential and commercial-backed mortgage securities of recent years.
The first "layer" would most likely be securities that are directly collateralized by the rental houses and other equity. Then like in the bad-old days of MBS there would be securities collateralized by the first layer.
The further each RBS is from being secured by the rental properties the more risk, the lower the rating, and the higher the interest rate offered to investors.

 

Blackstone owns approximately 32,000 single-family rental houses that it paid around $5.5 billion to buy. The next largest company in this business is American Homes 4 Rent which completed an initial public offering on Aug. 1 of 44.1 million shares for $16 a share.

Another publicly-traded rental housing company is SilverBayRealtyTrust (SBY_). SBY is trading below its IPO debut in December of $18.50 a share and closed Thursday at $16.10.
BlackstoneGroup's smart real estate track record may help to reduce investor angst about this deal and the efficacy of keeping the underlying rental houses occupied and the residents paying rent on a timely basis.

The involvement of Deutsche Bank also makes sense as it has been one of the leading lenders to real estate companies who purchase foreclosed homes.
One would think the fact that Deutsche Bank originated loans to BlackstoneGroup to the tune of more than $3.5 billion this year should make them suitable partners.
For those who would like a better picture of how Deutsche Bank shares have done in the past 12-months I offer the following chart for your viewing pleasure. DB data by YCharts

Deutsche Bank's Return on Invested Capital cratered at the end of 2012 and has improved slightly so far in 2013. The teaming of Deutsche Bank with BlackstoneGroup on a new bond backed by house rental payments may help ROIC for both companies. Only time will tell on that score.
But for those income-starved investors who may be tempted by the RBS products all I can say is remember the famous Latin words "Caveat Emptor" -- buyers beware!

Deutsche Bank at it again

I CANNOT BELIEVE THAT THE SEC, FDIC, AND CFPB, ARE ALLOWING DOUCHE BANK TO DO THIS!!! IT'S BECAUSE OF THE FRAUD THIS BANK  DID TO OUR COUNTRY AND THEIR SHADOW BANKING THAT FORECLOSURES WERE SPIRALING OUTTA CONTROL. THEY EARNED THE NAME FORECLOSURE KING! HOW CAN OUR GOVERNMENT ALLOW THIS TO HAPPEN AND CONTINUE. WHAT IS WRONG WITH YOU PEOPLE??????
 HOW MANY SHADOW BANKS OR HEDGE FUNDS ARE  YOU USING DB?? HAVE YOU INFORMED THE SEC THAT YOU SUPPLY THE MONEY, WRITE THE SECURITY, AND STAY ON AS TRUSTEE OF THESE BONDS?

Deutsche Bank Leading Wall Street Rental Loans

Deutsche Bank AG arranged a $1.5 billion credit line for Blackstone Group LP to buy single-family properties last week, after providing $2.1 billion to the firm earlier this year, according to three people with knowledge of the deal, who asked not to be identified because the loan is private. Leon Black’s Apollo Global Management LLC and Tricon Capital Group Inc., a Toronto-based real investment firm, also obtained loans for rental-home purchases this month from the Frankfurt-based bank.

The debt is giving an advantage to institutions competing with individuals, foreign investors and local landlords for a diminishing pool of distressed real estate to turn into rentals. While U.S. home prices remain about 28% below their 2006 peak, they’re climbing at the fastest pace in seven years, even as the homeownership rate declines and mortgage availability remains restricted after the housing crash.
“This allows us to further our acquisitions,” said Gary Berman, chief executive officer of Tricon Capital, whose $150 million loan has a minimum interest rate of 4.1%. “It’s attractively-priced capital.”
Tricon, which has bought 2,300 homes in areas including Southern California, Phoenix and Florida aims to acquire 4,000 in total by the end of next year. By using a credit facility, Tricon will increase potential returns to 11% to 12% compared with 7.5% without leverage, or borrowed money, Berman said.
Blackstone, which has purchased about 29,000 single-family homes in 13 metropolitan areas to become the largest owner in the U.S. obtained a $600 million credit line in October. The New York-based firm expanded it to $2.1 billion in March with a group of lenders led by Deutsche Bank. JPMorgan Chase & Co, Goldman Sachs Group Inc. and Wells Fargo & Co. participated in the new loan, said one of the people.
Deutsche Bank spokeswoman Renee Calabro and Blackstone spokesman Peter Rose declined to comment.
Banks are increasing the credit lines as more funds start leasing thousands of homes they’ve bought at foreclosure auctions, through open market purchases and in bulk deals.
American Homes 4 Rent, a Malibu, California-based single-family rental investor headed by Public Storage founderWayne Hughes, has a $500 million credit facility with Wells Fargo with an accordion feature that allows it to increase to $1 billion, according to a filing this month.
Silver Bay Realty Trust Corp., a real estate investment trust with more than 5,000 homes, obtained a $200 million facility in May from Bank of America Corp. and JPMorgan.
“These neighborhoods even from where they were two years ago, look so much better,” Chief Executive Officer David Miller said in an interview. “You can see the difference because institutions like us are putting $20,000 or more into the homes.”
The loan “will give us enhanced flexibility to acquire additional assets,” Miller said in a call with investors last month. “The execution of this facility demonstrates the increasing recognition by the capital markets of the single-family rental industry as an asset class and we expect additional financing opportunities will materialize over time.”  
The biggest lender in the industry, according to public filings and executives, is Deutsche Bank, which arranged a $200 million credit facility for Apollo this month, and a $100 million loan in April to Five Ten Capital LLC, a Piedmont, California-based single-family rental investor.
Deutsche Bank “is far and away the most sophisticated and best organized” of the lenders, Tricon’s Berman said.
In addition to earning fees from the credit lines, the bank eventually will sell debt to investors by securitizing rental payments, said Berman, whose company has $1.2 billion in U.S. real estate assets, including land and investments in builders.
The sale of asset-backed bonds will further transform a business that has traditionally been dominated by small investors into a new institutional asset class.
“It’s not a matter of if,” he said. “It’s a matter of when.”
The first securitization is about two or three months away, according to Steve Blevit, a Los Angeles attorney with Sidley Austin LLP, who’s worked on Deutsche Bank’s credit deals. The bank has a team of experts in commercial and residential real estate, who are able to structure single-family rental deals faster than competitors, Blevit said.
“No other lender in the space can do this like them,” he said.  
While the credit lines can help firms increase returns, some single-family rental investors, such as Carrington Holding Co. CEO Bruce Rose, oppose using leverage because it adds a level of risk at a time when yields are shrinking as purchase prices rise faster than rents. It no longer makes sense for him to buy homes, given the cost of his capital, because they’re “too expensive for what the market has morphed into,” Rose said in an interview last month.
Home prices rose about 12% through April from a year earlier, according to real estate data service CoreLogic Inc., the biggest increase since February 2006. Individual buyers, spurred by low mortgage rates, pushed up sales of existing homes to an annual pace of 5 million in May, the highest since 2009 when tax incentives spurred purchases, according to the median forecast of economists surveyed by Bloomberg ahead of a June 20 report from the National Association of Realtors. Borrowing costs for a 30-year mortgage rose to a 14-month high of 3.98% last week, according to Freddie Mac. That’s still down from 6.8% almost seven years ago.
While the biggest rental buyers have been able to access either public markets or bank-arranged credit lines, some smaller investors are seeking financing opportunities through Cerberus Capital Management LP, which started First Key Lending this year with plans to lend billions of dollars to landlords too big for government programs and too small for Wall Street. Fannie Mae limits landlords to loans on a maximum of 10 properties, and Freddie Mac will lend on four.
Cerberus is seeking to fill a void left by regional lenders that prior to the housing crash were the primary source of loans for landlords buying properties. At least 475 banks have failed since the real-estate collapse, according to the Federal Deposit Insurance Corp., while larger banks have tightened mortgage underwriting standards and are focusing on the biggest investors.