Kroll Bonds Rating and Fitch Ratings assigned preliminary ratings to Redwood Trust’s second residential mortgage-backed securitization in 2013 called
The deal is structured with $619.16 million of ‘AAA’ rated notes. Fitch also assigned ratings to the B-notes issued under the structure; Kroll will not rate these notes. The structure includes $14.6 million class B-1 notes rated 'AA'; $12.6 million of class B-2 notes rated 'A'; $6.6 million of class B-3 notes rated 'BBB'; $5.6 million of class B-4 notes rated 'BB'. An unrated $7.32 million of class B-5 notes is also being marketed.
The mortgage pool backing the deal is comprised of 777 first-lien mortgage loans. Approximately 98% of the loans in the pool are 30-year fixed rate mortgages; the rest of the pool is a mix of 25-year, 20-year and 15-year fixed rate mortgages.
The latest transaction has a greater concentration of loans originated by one bank, First Republic, which is headquartered in San Francisco. About 51% of the pool is originated by the bank, which in turn drives up the geographic concentration risk in the deal.
According to the Kroll presale report Sequoia pools exhibited a substantial reduction in geographic concentration over the course of 2012; the 2013 deals so far mark a departure from this. The latest Sequoia deal is backed by a pool of mortgages with greater geographic exposure to assets located in California. The concentration in San Francisco is significantly higher than seen in SEMT transactions post SEMT 2012-1. Redwood’s 2013-1 deal was also had high geographic concentration to California assets.
Fitch said in its presale report that it applied a 1.22x default penalty to the pool to account for the high geographic concentration risk.
The mortgage REIT reported in its 3Q 2012 review that it aimed to ramp up its non-agency loan production over 2013, with the goal of securitizing $300 million or more monthly.
