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REO-to-Rental securitization gets sterling Triple-A rating

Moody's provided risk analysis of Blackstone's Invitation Homes MBS

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Moody's Investors Service (MCO) provided a credit analysis for Invitation Homes 2013-SFR1, an REO-to-Rental securitization, awarding $278.7 million in triple-A ratings, in what is by far the largest tranche in the deal.

Morningstar, first to release a pre-sale report, also awarded a triple-A to the same trance, citing very high credit levels.

The credit ratings agency said it had some concerns about equity foreclosures in the deal but "both mortgages and pledges of the borrower's equity secure the loan that backs the transaction," said the pre-sale report. "Moody's was therefore able to assign high investment grade ratings to the senior certificates." Kroll Bond Ratings is rating the deal similarly.

The $479.1 million of mortgage-backed securities is blocked into four classes of certificates backed by one floating rate loan secured by mortgages on 3,207 single-family rental properties.

Blackstone Group (BX) spent the past two years building its empire of single-family rental homes via subsidiary Invitation Homes, spending $7.5 billion to acquire 40,000 houses. Now, the private-equity firm is planning to sell bonds backed by lease payments, which is a step in a new direction for the housing industry.

Moody's says it has a strong faith in the abilities of the day-to-day property manager, THR Property Management. Morninstar mentioned that it visited the Dallas hedquarters of THR and found the standard application of a two-step screening process for renters.

The master servicer is Midland Loan Services, a division of PNC Bank (PNC). The special servicer is Situs Holdings.

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