Redwood’s margins from non-agency mortgage activity declined in the second quarter and aren’t expected to increase much for the rest of the year, according to officials at the REIT. Redwood also has changed its MBS issuance strategy, putting seasoned mortgages into deals.
“The originations segment now acts as a much stronger macro hedge for our servicing operation, and we believe it will play a major role in helping us achieve our profitability and shareholder return targets,” said Jay Bray, Mr. Cooper’s chairman and CEO.
The decline in interest rates earlier this year increased originations and income for lenders and delayed some M&A activity. The lower rates also provided lenders with time to prepare for the future.
Jody Shenn, a senior analyst at Moody’s Investors Service, said, “ARRC’s recommendations and Fannie Mae’s and Freddie Mac’s ability to guide standards are signs that mostly uniform approaches will be used in mortgage originations.”