Redwood Trust, the only company to securitize jumbo loans during the past two years, has pushed backed its second deal to early 2011 because of a lack of available product.
In particular, the Mill Valley, Calif-based REIT pinpoints the cause: "major bank originators are reluctant to sell [jumbo] loans due to their high level of excess liquidity."
In other words, depository-based jumbo lenders are keeping the product in portfolio because the yield over their cost of funds is steep, and there's a lack of available good credits out there.
Redwood continues to believe there is a major business opportunity in the secondary market because Fannie Mae and Freddie Mac are destined to "shrink."
Discussing a revival in its residential and commercial franchises, the company notes in its new 3Q 'Redwood Review' that, "Progress is slower than any of us would like, but we are making progress nonetheless. Our residential loan conduit is up and running and we are hopeful that we can complete our second securitization in the first quarter of 2011."
Originally, the publicly traded REIT had hoped to pull off a second jumbo securitization in the fall or by yearend 2010.
Earlier this week Redwood posted a profit of $20 million for the third quarter, compared to $29 million in 2Q, and $27 million in the year ago quarter.
It also reported that it is seeing prepayment speeds increase on its $238 million jumbo securitization, which came to market in April.