This post first appeared on FloatingPath

That’s right, Lewis Ranieri, the slick bond trader from decades past whom was instrumental in developing mortgage-backed securities, says now that a new real estate bond backed by rental properties are virtually risk-free.

Mortgage rates REO

The market, known as REO-To-Rent, has seen over $20 billion in institutional investments over the past three years according to CNBC. The largest player in the space is Blackstone, who has purchased some 40,000 properties since the housing crisis and has turned most of those locations into rentals. According to its CEO, securitizing that income stream is the next logical step.

While the traditional mortgage-backed securities market is on life support, despite a grind higher in home values, according to Ranieri the rental bonds are different, ”because it’s almost done like the European covered bonds, because there’s enough cash flow and they can replace cash flow to pay the bonds..”

His take on the RMBS markets are quite interesting as well, saying there’s typically only a “handful of buyers” even for Triple-A tranches, whereas before “literally hundreds and hundreds” would line up to buy slices of the coveted U.S. mortgage market.