Officials at Redwood Trust suggest that the change in pricing for AAA tranches on new non-agency MBS in recent months has been driven by supply and demand, not concerns about the quality of issuance. “The market had come too far, too fast, and the supply and demand imbalance initiated a correction,” Redwood said. The premium on Redwood’s latest transaction was about 1.75 percentage points above an interest rate benchmark, resulting in a 2.59 percent premium for investors. Redwood said deals it issued in January sold with premiums as low as 97 basis points with yields of less than 200 bps for investors. The real estate investment trust said...
As more firms contemplate issuing jumbo MBS, there are growing concerns that there could be a few speed bumps along the way, namely rising whole loan prices, and an increase in the cost of money for investors that use swaps to fund their purchases of the AAA-rated tranches. The increase in whole loan prices is less of a concern, because it was somewhat anticipated given the “hot” nature of the market. Over the past few months, prices for jumbo whole loans have risen to as high as 103, compared to 101 and 102 last year. Craig Cole, a jumbo consultant and a former top production manager at Union Bank, San Francisco, told...
Issuance of non-agency jumbo mortgage-backed securities continues to increase along with the number of issuers participating in the market. Issuers acknowledge that spreads on AAA non-agency MBS are widening, causing margins to decline, but they suggest that a significant increase in non-agency MBS production will help tighten spreads, benefitting issuers. Credit Suisse issued its third non-agency jumbo MBS of the year this week. The $393.77 million deal received AAA ratings from DBRS and ...
While originations included in non-agency jumbo mortgage-backed securities in recent years have been of high-quality, significant differences exist among originators, according to a new analysis by Inside Nonconforming Markets. The average credit score on mortgages included in Redwood Trust’s non-agency jumbo MBS from 2011 through the first quarter of this year was 771.2, largely driven by First Republic Bank, which accounted for 47.0 percent of originations securitized by Redwood ... [Includes two data charts]
“It’s not a money problem, there’s plenty of money out there,” Martin Hughes, president and CEO of Redwood Trust, said last week at a hearing by the House Financial Services Committee. “The difficulty now is the uncertainty of investors that need to be waved back into the water.” Hughes said non-agency mortgage-backed security issuers need to make adjustments for investors. “I believe we need to first address investors’ demands for better risk mitigation, transparency, and alignment of interests ...
The American Securitization Forum proposed a number of regulatory and legislative changes last week to increase non-agency activity. The proposed changes were prompted by recent meetings with members of Congress. “The proposals can be implemented in the short term to expedite the process of bringing private capital back to the mortgage market by incrementally reducing the government-guaranteed market well below the current 90 percent share,” the ASF said. The ASF called for reform of the ...
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