Wall Street-backed landlords take bad mortgage route

[NEW YORK] Wall Street- backed landlords are showing a greater appetite for bad mortgages as a source for cheap property as the supply of foreclosed homes declines while housing prices continue to climb.

The companies have dominated US foreclosure auctions in the last two years by buying as many as 200,000 single-family homes. Now, American Homes 4 Rent, the second-biggest single-family landlord, Barry Sternlicht's Starwood Waypoint Residential Trust and Altisource Residential are leading acquisitions of non-performing loans, or NPLs, to expand their holdings of rental properties.

The shift to loans comes after foreclosure starts dropped to the lowest level since 2006 and house prices jumped in Atlanta, Phoenix and other markets where investors have made the most purchases. The development is raising concern among housing advocates that private equity firms and hedge funds will be more likely to take possession of the properties ra…