Redwood Trust is issuing another RMBS called Sequoia Mortgage Trust 2012-3 (SEMT 2012-3). Moody's Investors Service, Fitch Ratings and Kroll Bond Rating Agency are rating the deal.
This is Redwood's third transaction in 2012. The first deal worth $405 million happened in January while the second worth $327.9 million came to market in March. It is also the company's sixth RMBS post-crisis.
The senior-subordinate, shifting interest transaction is backed by 331 loans with a total balance of roughly $293.6 million as of the cutoff date, according to a Fitch presale report. The pool comprises prime fixed-rate mortgages originated by different entities.
Distributions of principal and interest and loss allocations are based on a traditional senior-subordinate shifting-interest structure. Fitch noted the deal's high-quality collateral, which comprises 30-year fixed-rate, fully documented mortgages to borrowers that have strong credit profiles, low leverage, and considerable liquid reserves.
According to the rating agency, third-party, loan-level due diligence was conducted on about 79% of the overall pool, and Fitch thinks that the results of the review generally show strong underwriting controls.
Roughly 57% of the pool was originated by smaller lenders that have limited non-agency performance history. This percentage has risen versus prior Redwood securitizations, Fitch said. But, all of these loans were reviewed by a third-party due diligence firm with immaterial findings and Fitch believes the credit enhancement on this offering is enough to lessen the originator risk.
The offering's originator breakdown are as follows: First Republic Bank (38% of the pool); PrimeLending (16.8%); United Shore Financial (9.8%); Flagstar Bank (9.3); PHH Mortgage Corp. (5.2%); and other lenders (20.9%).
While the originated LTVs are higher than the firm's prior RMBS, Fitch’s home price declines have dropped as sustainable values are approached. The sustainable LTV for this offering is seen as similar to the previous Redwood offering. Additionally, the rating agency said that the geographic concentration mix has improved slightly compared to other recent Redwood deals.