Wall Street Investors Buy Up Neighborhoods

Rental Homes: Next Wall Street Idea?

Wall Street is at it again

Have you read the recent media reports about Wall Street firms buying up homes in order to create rental portfolios and then securitize the rental payments?

If it sounds familiar- it is.  This is the same strategy that backfired so miserably when Wall Street sliced and diced mortgages.

This week, the Center for American Progress released a report, “When Wall Street Buys Main Street” that more closely examines the first mortgage-backed security supported by income from single family rental properties.  The authors note that the bond is set to mature in two to five years.  If Invitation Homes (a subsidiary of Blackstone) is unable to pay back the bond holders, there could be negative consequences. For example, Invitation Homes could be forced to sell all of the rental homes to pay back the bond.  This sudden flood of homes onto local housing markets would hurt property values, and tenants would also be impacted.

The California Reinvestment Coalition, Housing and Economic Rights Advocates, and other advocates will be calling on federal regulators next week to address this issue.  In the mean time, if you’re interested in learning more about how this new strategy could affect current tenants, homeowners, communities, and prospective homeowners, here’s a few selected articles and resources:

  1. Home Loan Servicing Solutions Ltd. buys mortgage servicing rights from Ocwen and then hires it to collect loan payments. Altisource Residential Corp. (RESI:US) purchases delinquent loans, including some from Ocwen, to turn into rental homes. It’s managed by Altisource Asset Management Corp. And Altisource Portfolio Solutions provides services to Ocwen’s portfolio. “If a mortgage goes into foreclosure and you lose those servicing fees, so what,” said Christopher Wyatt, a housing consultant and former vice president at Goldman Sachs Group Inc.’s Litton Loan Servicing. “You can funnel it to one of your other businesses and still make money from it.” Billionaire Erbey Fails to Halt Ocwen Slide on Probe: Mortgages  (BloombergBusinessweek)
  2. Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.  How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme—Again  (Mother Jones)
  3. Doretha Johnson, 59, had rented a home near North Graham Street and Interstate 85 for nearly four years when her landlord sold it to a subsidiary of Blackstone, a Wall Street private equity giant. The house’s new owner, Invitation Homes, raised the rent by a third, beyond what she said her fixed income would bearCharlotte’s Wall Street landlords move quickly to evict renters (Charlotte Observer)
  4. The report by the Oakland-based Urban Strategies Council entitled “Who Owns Your Neighborhood?” said that 62 percent of the 10,508 completed foreclosures in Oakland since 2007 are either still owned by a financial institution or acquired by an investor. It said that as of October 2011, investors had acquired 42 percent of all properties that went through foreclosure in the cityReport Finds Investors Buying Up Foreclosed Oakland Homes (CBS San Francisco)
  5. Fitch’s concerns are further heightened by the number of operators concentrating their investments in a handful of states and metropolitan statistical areas (MSAs), which, based on most business models, are at the neighborhood level. Because of the specific demographic targeted by these institutional buyers and the inelasticity of rents, transactions are highly vulnerable to unknown variables that could potentially impact the cash flows and yields. Among them include repair and maintenance expense, capital expenditures, rising property taxes, homeowners association restrictions, or the potential for municipality involvement. Unlike other asset classes, SFRs do not have the benefit of historical performance over several business or housing cycles that would otherwise flush out some of these uncertaintiesRPT-Fitch: Too Soon for ‘AAA’ on Single Family Rental Securitizations (Fitch Press Release)
  6. Nicole Borden, a real estate agent with Coldwell Banker in Atlanta, said she was told this month by representatives from Invitation Homes and American Homes 4 Rent that the companies aren’t offering any of the homes on the market to Section 8 voucher holders. “This is not homeownership,” Borden said. “I don’t understand how so many people are being turned down from rentals.”  Wall Street’s Rental Bet Brings Quandary Housing Poor (Bloomberg)

Appointment of Representative Mel Watt Important Step Forward for Housing Recovery

Rep. Mel Watt is Confirmed to lead FHFA

December 10, 2013–In response to today’s Senate vote to confirm Representative Mel Watt as the next director of the Federal Housing Finance Agency, Kevin Stein, Associate Director of the California Reinvestment Coalition, released this statement:

“The California Reinvestment Coalition applauds the confirmation of Representative Mel Watt to head the Federal Housing Finance Agency, the regulator of Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. For years, California tenants, homeowners and communities suffered because of the policy positions of the outgoing acting director of the FHFA, Ed DeMarco.  Mr. DeMarco set policy for how banks and servicers are required to service loans held by Fannie Mae and Freddie Mac, including how to provide assistance to homeowners facing foreclosure.  Instead of using this important position to keep more Americans in their homes, he continued policies that greatly worsened the foreclosure crisis.

These policies included:

  • Fighting against the enactment of California’s landmark Homeowner Bill of Rights, a law widely applauded for protecting homeowners and which has already been duplicated in Nevada and Minnesota;
  • Not maintaining sufficient protections for tenants negatively impacted when the homes they were renting were foreclosed on;
  • Refusing to offer favorable principal reduction loan modifications to families struggling to pay their GSE loans;
  • Selling foreclosed Fannie and Freddie homes to private investors instead of residents and nonprofits who could have used the homes to promote community stability; and
  • Aggressively working against local governments who are considering using tools to stem the foreclosure tide, including eminent domain.

In light of these polices, CRC organized a letter (link to letter) in 2012, which 96 organizations signed, calling on Acting Director Ed DeMarco to either resign or change policies at Fannie Mae and Freddie Mac.   CRC is hopeful that FHFA Director Watt will right these, and other, wrongs, and lead the GSEs to finding their way back towards helping all qualified families attain and maintain homeownership, or access much needed affordable housing. We also are pleased Mr. Watt will be in place to ensure that any reform of the GSEs will not leave behind low income tenants, homeowners, and communities.”

Additional background

Since the beginning of the foreclosure crisis, the California Reinvestment Coalition has conducted an annual survey of housing counselors and nonprofit attorneys about their experiences working with banks and servicers.

In CRC’s 2012 survey, (link to survey) housing counselors and nonprofit attorneys reported:

  • 81% reported “mixed or negative” experiences in trying to escalate cases to help homeowners when the loans were held by Fannie or Freddie.
  • 66% of counselors rated loans serviced on behalf of GSEs as either “terrible” or “bad” when asked how likely the servicers were to help borrowers save their homes when they thought that outcome was possible.


Senate Blocks Confirmation of Mel Watt- 97 California Orgs Likely Disappointed in Today’s Vote

Fannie and Freddie

The Wall Street Journal reports that Mel Watt’s confirmation to lead the FHFA was blocked by Republican Senators today.

This vote was important because of the considerable market space occupied by Fannie and Freddie (overseen by FHFA), and the current director’s stance against helping homeowners.

To learn more about why homeowners, housing counselors, and housing advocates have been calling for new leadership at the FHFA, read CRC’s March 2012 letter to Acting Director Ed DeMarco:  97 California Organizations Demand Immediate Foreclosure Policy Changes from FHFA 

Confirm Congressman Melvin Watt to Lead the Federal Housing Finance Agency

Mel Watt Confirmation

photo credit: MassLive.com: “Springfield families facing foreclosure protest policies of Fannie Mae and Freddie Mac”

Congressman Melvin Watt has been nominated to lead the Federal Housing Finance Agency, unfortunately, his confirmation has not moved forward in Congress yet.

The California Reinvestment Coalition supports the confirmation of Congressman Melvin Watt as the Director of the Federal Housing Finance Agency (FHFA) and recently signed onto a letter with 45 other organizations, urging Congress to allow an up or down vote.  In 2012, CRC organized a letter with 96 other community groups  to FHFA acting director Ed DeMarco, asking him to allow principal reductions with Fannie/Freddie loans, stop dual-tracking with Fannie/Freddie loans, and to offer tenants long-term leases if they are being displaced by their landlord’s foreclosure.

The director of the FHFA holds considerable power to improve policies at Fannie and Freddie and to ensure no more unnecessary foreclosures or tenant displacements, which is why CRC signed onto the letter below, which was organized by the National Fair Housing Alliance. To add your support and to stay posted on Representative Watt’s confirmation, follow #confirmwatt on Twitter.

Confirm Congressman Melvin Watt to Lead the Federal Housing Finance Agency

September 11, 2013

Dear Senator:

The undersigned civil rights, consumer, labor, housing, faith, and community
development organizations write to urge you to allow an up or down vote on the
nomination of Congressman Melvin Watt to a five-year term as Director of the Federal
Housing Finance Agency (FHFA). Congressman Watt is an extremely qualified nominee
to lead the FHFA and has an exceptional understanding of financial markets and an
appreciation for the crucial role that FHFA plays in stabilizing and strengthening our

American families continue to reel from the foreclosure crisis, and it is far from over.
Today, more than 10.7 million homeowners in the United States owe at least 25 percent or more on their mortgage than their property is actually worth, representing 23 percent of all homeowners with a mortgage in the nation. Families remain unable to sell and are stuck in their homes taking significant losses to their bottom lines until the housing market fully recovers. American homeowners need a regulator who will get things back on track for everyone.

Congressman Watt was one of the first to warn against the predatory mortgage lending practices that characterized the boom in subprime lending that devastated our entire economy. He helped to lead the effort to end these often discriminatory lending practices that caused the collapse of our financial system and led to the Great Recession. Congressman Watt called for safety, soundness and fairness to prevail over the blind rush for short-term profits.

Mr. Watt has demonstrated a commitment to helping communities that have been hardest hit by the foreclosure crisis, so that they too can share in our economic recovery. A hard lesson from the crisis is that when some of our communities do not receive fair treatment, all of our communities are impacted detrimentally. Our global competitiveness is challenged when all of our communities do not have the opportunity to succeed together.

Mr. Watt’s leadership would assure that the American public continues to have access to wealth-building opportunities through homeownership and would ensure access to much needed rental housing at a time when communities of color have suffered a massive loss of wealth built over a generation.

Throughout his career, Congressman Watt has proven that he is a fair, principled and effective leader whose policy positions are based on consumer and market needs. He understands how important it is for the secondary mortgage market to provide liquidity for all market segments, including those that historically have been underserved, in a way that promotes healthy, responsible growth for the entire country. He is eminently qualified for this job, and we urge the Senate to move quickly to confirm his nomination.


American Association of People with Disabilities
American Federation of Government Employees
Americans for Financial Reform
Asian Americans Advancing Justice
Bazelon Center for Mental Health Law
California Reinvestment Coalition
Center for Responsible Lending
Communications Workers of America
Community Action Partnership
Consumer Action
Empire Justice Center
The Greenlining Institute
Hip Hop Caucus
International Union, United Automobile, Aerospace & Agricultural Implement Workers
of America (UAW)
The Leadership Conference on Civil and Human Rights
NAACP Legal Defense & Educational Fund, Inc.
National Association of Consumer Advocates
National Association of Human Rights Workers (NAHRW)
National Association of Neighborhoods
National Association for Equal Opportunity in Higher Education
National Bar Association
National Black Justice Coalition
National Center for Lesbian Rights
National Coalition for Asian Pacific American Community Development (National
National Community Reinvestment Coalition
National Council of La Raza
National Disability Rights Network
National Fair Housing Alliance
National Gay and Lesbian Task Force
National Immigration Law Center
National Law Center on Homelessness & Poverty
National Low Income Housing Coalition
National Organization for Women
National People’s Action
page 3/ Confirm Congressman Melvin Watt to Lead the FHFA
National Urban League
New Bottom Line
The Opportunity Agenda
PICO National Network
Poverty & Race Research Action Council
United Food and Commercial Workers, International
United Steelworkers (USW)