With investors buying lots of foreclosures and turning them into rentals, the next step is obvious — sell bonds against the rent flow!

That’s right. You’ll soon be able to speculate on the ability of renters to pay. And you know what will come next: insurance against those renters not paying. And then you’ll be able to get in on that insurance action, effectively betting against the renters.

As HousingWire reports, credit rating agencies are figuring out how to quantify the risk of these bonds-against-rental-income.

Sound vaguely familiar?

Here, read this:

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.

After everything that’s happened, would anyone in their right mind trust whatever ratings these bonds get? Suuuuuuure, that’s a AAA bond. Suuuuuuure those renters are guaranteed to keep paying. Hey, weren’t you the same folks who sold us those AAA-rated mortgage-backed securities?

One of these days I suspect we’ll get to say, “Brother, you asked for it.”