Redwood Trust's latest Sequoia residential mortgage backed securitization will offer $341 million worth of bonds backed by a pool of 30-year, fixed-rate residential mortgage loans.

Credit Suisse is the lead manager on the deal, Sequoia Mortgage Trust 2014-4. Kroll Bond Ratings Agency has assigned preliminary ratings to the deal.

Most of the pool, or 98.8%, falls under the scope of the ability-to-replay rules and are eligible for the qualified mortgage (QM) safe harbor. However the issuer has increased the number of loans that do not qualify as QM, to eight. The loans make up 1.5% of the pool and are at greater risk of litigation-related losses. Redwood’s previous deal, Sequoia Mortgage Trust 2014-2, first introduced non-QM loans to the Sequoia pool. The deal included only two loans that did not meet the QM standard.

Much like the previous three deals the issuer has brought to market this year, the loans included in the pool are all made to high credit borrowers that have a weighted average FICO of 773. The mortgages are mostly concentrated in California, which makes up 32.8% of the pool.  

The majorty of the loans were purchased from First Republic Bank, which underwrote 32.6% of the pool. The rest of the loans came from 83 different originators. This level of seller diversity helps reduce geographic concentration in the pool but it also exposes the pool to greater fluctuation in “underwriting standards and processes of sellers with limited jumbo mortgage loan performance history,”  according to KBRA, which is rating the deal. 

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