Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. INVESTING & PORTFOLIO STRATEGIES
April 04, 2016 01:00 AM

New mortgage security blends residential and commercial

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    iStock

    There's a new kid on the block.

    Institutional investors are getting exposure to a new type of residential security, one that securitizes bundles of loans for the large portfolios of single-family homes big managers bought as rental properties after the financial crisis.

    These new offerings are a combination of residential mortgage-backed securities and commercial MBS, said Brian Grow, managing director, RMBS, at Morningstar Credit Ratings LLC, New York, the rating agency subsidiary of Morningstar Inc.

    It's a small but growing market. The bonds secure the rental cash flow. Morningstar Credit Ratings has rated all of the single-family rental securities — 28 bonds with total issuance of $14.29 billion. Morningstar analyzes them differently from RMBS, in that they are rated based on whether the total rents collected exceed the mortgages, Mr. Grow said.

    After the housing market collapsed in 2008, large managers like Blackstone Group, and others, started buying foreclosed homes, renovating them and renting them out.

    Some of these single-family home portfolios have been spun out into real estate investment trusts. The largest REIT of this kind, American Homes 4 Rent, has done $2.5 billion of securitizations, said Dave Bragg, managing director of Green Street Advisors LLC, a Newport Beach, Calif.-based real estate research firm.

    MatlinPatterson Global Advisers LLC does not have a large investment in these securities, but it is a small market, said Marc Rosenthal, co-portfolio manager and co-head of the New York-based hedge fund firm's securitized credit team.

    The move by Blackstone and other money managers to buy single-family homes to rent “was a huge savior for the subprime residential market in 2012 to 2013,” Mr. Rosenthal said.

    “Those investors bought property with cash and were able to get the (portfolio of single-family homes) cash flowing, and now they are securitizing the rental cash flows,” he noted.

    Another small but growing market that for some managers is serving as an RMBS proxy is credit risk transfers.

    The Federal Housing Finance Agency started the program in 2012 to reduce Fannie Mae and Freddie Mac's overall risk. Fannie Mae and Freddie Mac have been selling off the riskiest slices of the single-family mortgages in their portfolios creating this small — $25 billion — but growing securities market, explained Noah Funderburk, senior vice president and portfolio manager in the Durham, N.C., office of money manager Amundi Smith Breeden. He specializes in residential credit securities.

    “Payments are made by Fannie Mae and Freddie Mac to emulate the economics of RMBS without interfering with the agency mortgage-backed securities market,” Mr. Funderburk said.

    Babson Capital Management LLC also has looked at credit risk transfers as part of its asset-backed portfolios.

    “With regards to credit risk transfer deals, we don't view spreads in this market as unattractive in their own right, but we are finding better relative value in other securitized products,” said Douglas M. Trevallion II, managing director and co-head of securitized products group at Babson Capital in the Springfield, Mass. office.

    Related Articles
    RMBS slowly moving back into portfolios
    California attorney general sues Morgan Stanley over MBS sold to CalPERS, CalST…
    RMBS slowly moving back into portfolios
    Cerberus said to plan biggest European ABS sale since 2007
    REITs outperform broad equity markets in quarter, year
    DoubleLine's Gundlach recommends mortgage bonds rather than corporate debt
    Firms resurrect non-agency RMBS market
    Recommended for You
    Headshot of Mark Buckley
    Coalition Greenwich: Alternatives to continue gaining on public equity
    OCIO: A Specialized Landscape
    Sponsored Content: OCIO: A Specialized Landscape
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print