The Real Deal New York

Wall Street REITs jumping on bad loans for cheap rentals

With foreclosure starts down, interest in NPLs picking up

February 21, 2014 08:40AM

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From left: Doug Brien and Gary Beasley of Waypoint, Barry Sternlicht of Starwood

From left: Doug Brien and Gary Beasley of Waypoint, Barry Sternlicht of Starwood

Barry Sternlicht’s Starwood Waypoint Residential Trust and other Wall Street-backed property-management firms are increasingly snatching up non-performing loans as a source for inexpensive rental properties.

Housing advocates are concerned that hedge funds and private equity funds will seize the homes instead of providing loan modifications.

The firms go after bad loans because housing prices are soaring and foreclosures are in decline.

“Our intent is to approach some of these folks where it just doesn’t look like they’re going to get caught up on their loans,” Doug Brien of Starwood Waypoint told Bloomberg News. Starwood can “offer them the opportunities to stay in their homes and keep their kids in the same school.”

Starwood invested nearly $220 million to pick up nearly 1,736 bad loans in January. Up to half of those loans will serve as rentals. American Homes 4 Rent and Altisource Residential are also jumping into the NPL game. American Homes announced a joint venture last year to purchase distressed loans. [Bloomberg News]Mark Maurer

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