Redwood Trust officials have been hearing plenty of talk about other firms entering the Jumbo MBS space — but aren’t holding their breath about seeing new bonds issued anytime soon.
“We hear about a lot of players,” said Redwood chief operating officer Brett Nicholas, “but it takes a lot of prep work to bring these deals to market. There’s a lot of planning involved, a lot of back office. We’d like to see other deals but we haven’t yet.”
Last week the publicly traded REIT priced a $290 million jumbo MBS bond, its second nonconforming deal within 10 months. (The average LTV on the collateral is 59%. The average FICO score is 775.)
To date, the Mill Valley, Calif.-based company is the only firm to issue a new nonprime mortgage bond since financial markets crashed in the fall of 2008.
It’s anticipated that come this fall when the Fannie Mae/Freddie Mac loan limit falls from $729,750 to $625,500, more jumbo product will be available to correspondent buyers such as Redwood.
But Nicholas and Redwood executive Mike McMahon said that just because the loan limit will decline that doesn’t mean a rush of deals will be ready to go.
In a recent interview with ASR sister publication National Mortgage News (NMN), Nicholas noted that the REIT is reviewing mortgages on a daily basis with an eye toward purchase. He declined to say how many loans the firm is looking at, and would not disclose the identity of potential sellers. (In response to a question, he said Redwood has no plans to become a direct lender and will remain as a correspondent buyer.)
Other companies that are working on jumbo conduits and/or MBS programs include BlackRock, Goldman Sachs and PIMCO.
Sources told NMN that PIMCO has received commitments of up to $1 billion to invest in jumbo mortgages as part of a conduit project, which carries the working name of “Project Bravo.” (PIMCO declined to comment.)
Another potential player in Jumbos is Shellpoint Mortgage (see related story), a startup company formed by C-BASS founders Bruce Williams and Saul Sanders. The two are talking to mortgage banker New Penn Financial, Plymouth Meeting, Pa., about buying the company, an $800 million a year originator.
Presumably, Shellpoint/New Penn would fund loans and use them in their own securitizations. Redwood, Goldman and PIMCO plan to be correspondent buyers.
New Penn CEO Jerry Schiano declined to comment on the matter while Williams and Sanders could not be reached for comment.