Credit ratings agencies are exploring ways to evaluate risks in the possible securitization of REO-to-rental cashflows.

The Federal Housing Finance Agency continues work on a pilot program to sell roughly 2,500 foreclosed properties held by Fannie Mae to investors as rental properties.

DBRS released a request for information in May and said if the monthly rent paid on these properties becomes packaged into bonds, new criteria would need to be developed to understand their risk. Borrower credit and equity would be less of a factor compared to the maintenance of the home, terms of the rental agreements and how the properties are managed.

"DBRS recognizes that performance has been favorable when the operators have been required to put down 100% of their own funds and competition has been moderate in most submarkets," the agency said. "However, when financing becomes more available, it may change some of the dynamics in terms of asset purchase price and selection."

A recent research note from Standard & Poor's analysts said the rental streams could be a steady cash flow to back the deals. They added by securitizing the properties, investors can participate in the program without having to own the homes themselves. Various tranches would allow investors to buy different sets of risk in the program.

"The (FHFA) plan has captured the attention of securitization market participants," S&P analysts said.