Hidden Bomb in Single-Family Rental Securitizations: Trigger Risk
Yield-hungry investors have been snapping up single family rental securitizations, with recent deals heavily oversubscribed. Buyers have been comforted by raging agency reviews that give the top tranches AAA grades, based on loss cushions that these scorekeepers treat as generous (a dissenting view comes from Standard & Poors, which stated that the “operational infancy” of these rental securitizations made them ineligible for a triple A rating).
However, investors appear to be overlooking a risk component that can deliver large-scale losses. We’ll call it trigger risk.
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