Single-Borrower SFR Asset Class Remains Strong

The performance of the single-borrower, single-family rental (SFR) class remained strong in January as vacancy rates improved slightly and delinquency rates remained low, according to Morningstar Credit Ratings’ Single-Family Rental Performance Summary, covering all Morningstar-Rated Securitizations as of the end of January 2016.

Delinquency rates dropped in January after a slight uptick in December, Out of the 23 transactions covered in Morningstar’s report, 14 of them experienced a decline in delinquency rate, thus keeping the overall rate low. According to Morningstar, cash flows in SFR transactions remained sufficient to cover bond obligations.

Morningstar data shows that properties generally do not remain vacant for longer than three to four months, though some of the transactions contained higher percentages of properties that were five or more months delinquent (Colony American Homes—CAH 2014-1, SWAY Residential—SWAY 2014-1, and Progress Residential—PRD 2014-SFR1 and PRD 2015-SFR1). In IH (Invitation Homes) 2014-SFR2, 7 percent of vacant properties have been unoccupied for at least 10 months, according to Morningstar.

Delinquency rates, which are based on the number of properties flagged as delinquent in the monthly property-level data (each issuer uses its own criteria for classifying a tenant as delinquent), were generally lower in January compared with December and remained low overall. The transaction with the highest delinquency rate in January was ARP (American Residential Properties) 2015-SFR1 at 2.2 percent, up from 1.7 percent in December; for PRD (Progresss Residential) 2015-SFR2, the delinquency rate fell from 1.7 percent down to 1.2 percent for that same period. For IH (Invitation Homes) 2013-SFR1, the delinquency rate dropped from 1.1 percent in December to 0.3 percent in January.

Turnover rates in the properties for the transactions covered generally maintained the declining trend they have been experiencing over the last few months. AH4R (American Homes 4 Rent) 2015-SFR1 reported the highest turnover rate for January at 3.4 percent, but that was an improvement for December’s rate of 4.6 percent. IH 2013-1 experienced the largest increase in turnover rate from December to January, from 2.2 percent up to 3.0 percent, while PRD 2015-SFR1 experienced a decline from 2.1 percent to 1.3 percent month-over-month in January.

Click here to view the complete report from Morningstar.