A public-private investment program for renting foreclosed Fannie Mae and Freddie Mac properties proved to be a popular, if esoteric, topic at the latest American Securitization Forum conference.
In one panel, participants largely supported the idea. In retrospect, Barclays Capital (BCS) believes such a program, while beneficial to home prices, will be too difficult to implement.
“Rentals yields (adjusted for vacancies/future vacancies) are much lower than where bonds yields in the non-agency space were when the PPIP was announced,” analysts at the investment bank said. “As a result, the equity yields on such a program would look less attractive.”
Further, BarCap analysts point out that managing hundreds of bonds from a central location, as Wall Street firms are used to, is simpler than managing thousands of properties across the country.
Laurie Goodman of Amherst Securities argued at the conference that a ramp up of rental operations across the country would result in a cottage industry devoted to third-party management of these properties.
Barclays analysts disagree.
“As a result, this remains difficult to scale effectively and may not draw as much money as envisioned,” they counter, adding “it might be more effective in specific regions with higher rental yields.”
Write to Jacob Gaffney.
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