Despite booming volume in the first quarter, fixed-rate jumbo securities are expected to slack off some given the backup in interest rates, according to the president of the nation's third-largest conduit for jumbo securitizations.
"We expect that fixed-rate business probably will slow down a little bit as rates pick up," said Michael Parker, president of PNC Mortgage Securities Corp. "We're seeing that in our mortgage company [PNC Mortgage Corp.] and expect it to come up that pipeline."
The anticipated break follows volume of $4.3 billion in the first quarter of 1999, which exceeded the same period last year by 28%. He added that volume remains strong at the moment because mortgages take from 30 to 90 days to get through the origination pipeline.
In fact, during the first quarter of the year, PNC MSC extended a growth curve that goes back several years and now puts PNC MSC among the top three conduits. At the same time, the company is moving ahead with its online efforts.
As part of its expanded presence in the jumbo world, this month and last month PNC MSC introduced a series of new online services that allow investors to now see and analyze the world underlying their securities.
"This Web technology gives investors the ability to use mountains of data on our securities, and it's in a very user-friendly format," said Parker. "Investors can download the information into their own PC and manipulate it offline."
Among the features offered is the ability to drill down to loan level analysis, something investors are increasingly demanding. "For example, an investor might want to know what types of loans are prepaying faster or slower in the current environment," he said.
"The drill-through feature also permits investors timely access to deal summaries and descriptions by pool," adds Alex Topping, PNC MSC senior vice president.
Historical remittance information is included and updated monthly. Topping said "collateral stratification reports" are also available.
Last year, according to the Vernon Hills, Ill.-based company, PNC MSC's publicly-issued volume totaled $13.2 billion, making PNC MSC the third-largest jumbo conduit. Parker said from 40% to 50% of the conduit's volume is derived from alternative-A mortgages.
"The alternative-A product grew rapidly over the past two years to become a substantial portion of all originations," he said, "but growth has probably now plateaued."
When asked to comment on what might distinguish PNC MSC from its competitors, Parker points to the company's 25-year commitment to the private MBS market and its relationship with its sister company, PNC Mortgage Corp. of America. "We bring considerable experience in all aspects of the securitization process, including due diligence, managing the rating-agency aspect of securitization, master servicing and bond administration," he said.
In a recent report on PNC MSC, Moody's Investors Service said PNC MSC profits from the long experience of its seasoned mortgage professionals and its affiliation with PNC Mortgage and PNC Bank Corp., and their mortgage-banking and warehouse-lending professionals.
Parker said other advantages stem from the geographical dispersion of loans in PNC securities and from a second underwriting. He said companies that securitize their own product normally only underwrite the mortgage once. He then added that in PNC MSC deals, a mortgage typically is first underwritten by the originator and then a second time by PNC MSC.