Redwood launches first 2020 prime jumbo issuance

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Redwood Trust’s next mortgage-backed securitization consists almost entirely of older mortgages it originally sold off, but has since reacquired to assign to its first prime jumbo securitization of 2020.

According to Kroll Bond Rating Agency, 86% of the $459 million pool of loans includes mortgages that Redwood had previously sold to a third-party investor. The result is a pool of large loans with vintages dating to 2014, and a weighted average loan age of 51.4 months – which is “substantially in excess of newly originated collateral that Redwood typically pools, according to Kroll.

Sequoia Mortgage Trust 2020-1 is a transaction consisting of super-senior, senior-support and subordinate notes, all secured by a pool by 742 prime fixed-rate mortgages originated between 2014 and 2019. The loans are held by the Redwood trust and serviced by Nationstar Mortgage LLC.

The deal is the most seasoned of Redwood’s 60 prior securitizations of large non-agency loans totaling $22.8 billion since 2010, according to Kroll as well as Fitch Ratings.

The loans Redwood repurchased largely have clean payment histories; the SEMT 2020-1 loans have had minimal levels of recent default, with only 4.4% of the pool (less than 30 loans) that ever had delinquencies in excess of 30 or 60 days.

Because of the age and good payment history of the loans, the deal has the lowest expected loss scenario (3%) and senior-note credit enhancement (12%) of any prime RMBS deal rated by Fitch in the post-crisis era, according to that agency.

Kroll also has only 3% loss expectations for the deal.

Both agencies have rated three tranches of super senior notes with preliminary AAA ratings.

Redwood acquired the loans from 146 different originators, with PrimeLending (10.4%) and Fairway Independent Mortgage (4.4%) representing the largest contributors to the pool.

The loans have an average balance of $618,971 with weighted-average coupons of 4.13%. Most of the owners have substantial average liquid reserves of $342,912 and annual incomes of $229,707, and have significant equity in the homes with an average current loan-to-value ratio of 71.3% for the pool. The weighted average FICO of the pool is 773.

The loans are all fixed rate, and carry 30-year, 25-year and 20-year terms. All of the loans are considered safe-harbor qualified mortgages, even though a portion were originated prior to federal regulatory ability-to-repay rules.

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