It's still slow going for PennyMac Mortgage Investment Trust. The real estate investment trust, run by veterans of Countrywide Financial Corp., said this week that it lost money during its first full quarter of operations — and an auction for a failed bank's loan portfolio.
There were 23 bids in all at the Federal Deposit Insurance Corp.'s (FDIC) auction in September of the $1.3 billion portfolio of Franklin Bank, underscoring the competition among would-be bottom-fishers for a discouragingly small pool of available assets.
Residential Credit Solutions of Fort Worth won the auction, agreeing to pay about $64 million for a 50% stake in Franklin Venture, the entity in which the nonperforming mortgages were placed. The FDIC retained the other 50%.
Investors in distressed assets have struggled to build their portfolios in the wake of the housing crisis.
Many banks and mortgage lenders have held on to more such assets than the market expected, rather than sell them at deep discounts.
"Transactions take longer than they used to, but we continue to evaluate many unique opportunities," PennyMac's president and chief operating officer, David Spector, said during a prerecorded Webcast.
Despite being outbid, PennyMac managed to expand its portfolio during the fourth quarter, purchasing residential whole loans with unpaid principal balances of $40.1 million as well as $23.6 million of RMBS.
Those purchases bring the total amount invested since August, the month after the REIT went public, to $119.1 million. PennyMac said it is also close to finalizing a deal to buy nonperforming residential whole loans at a discount to their $100 million in unpaid principal balances.
The REIT also indicated that it would continue to seek deals with the FDIC.
"The FDIC has always figured prominently in our asset acquisition strategy," said Stan Kurland, PennyMac's chairman and chief executive. "Despite the challenges the market presents, we remain firm in our commitment to investing wisely."
PennyMac said it expects the FDIC to auction three or more pools of performing or nonperforming residential loans in the coming months.
FDIC spokesman David Barr said the agency does not discuss upcoming sales.
Because of the low volume of available deals and trading activity, PennyMac is forming a conduit that will allow it to purchase newly originated loans from small mortgage lenders for securitization.
The REIT is also looking at buying mortgage servicing rights from failed businesses.
For the fourth quarter, PennyMac recorded a net loss of $1.2 million, or 7 cents a share, as start-up costs exceeded income.
The REIT is managed by Private National Mortgage Acceptance Co., which Kurland, the former president of Countrywide, founded in 2008. Both entities are based in Calabasas, Calif., where Countrywide (now a part of Bank of America Corp.) was based.