Securitizing Rent

Mortgage-backed securities were given much of the blame for the recent financial crisis. As a result of the financial crisis, home prices dropped dramatically in many areas of the country and homeowners who had their homes foreclosed were forced to rent. Because of these conditions, some investors have found an opportunity by buying houses at reduced prices and renting those houses. For example, Blackstone Group LP has spent more than $7.8 billion on 41,000 homes. To fund the house buying, bonds backed by the rental income from the houses are now being sold and could reach $30 billion per year. Because of the rapid growth in the market and fears of a repeat of mortgage-backed bond problems, at least one California Congressman has requested that the Financial Services Committee hold hearings on these bonds.