Redwood Trust – the nation’s only active securitizer of Jumbo MBS – posted a $3 million loss in the fourth quarter, compared to a profit of $15 million in the year ago period, but is promising to plough ahead in the PLS market.
According to press statement released after the market’s close on Monday, the company predicted that it will buy $2 billion of Jumbo loans from 30 to 40 mortgage originators in 2012 and come to market with at least six securitizations (including the one it priced a few weeks ago).
“Our business decision either to securitize or sell whole loans remains fluid and will be based on balancing our best value execution and the franchise value of building out our securitization program,” the publicly traded REIT said.
But in its Redwood Review letter to shareholders it noted that its “build it and they will come approach” to the Jumbo market is expensive and a drag on earnings.
The firm is telling shareholders to be patient with its Jumbo strategy, adding that there is an “upside” – that its businesses “are hard to replicate and they are scalable, which should help us improve our returns as we ramp up volume.”
Based in Mill Valley, Calif., Redwood is also quite bullish on the commercial mortgage market where it funded $128 million of mezzanine loans during the year.