Two Harbors Investment Corp said during its 3Q 2013 financial results conference call on Wednesday that it has a good pipeline of originator partners to support its non-agency RMBS program.
The mortgage REIT said that presently it has 30 jumbo loan originators in various stages of approval that will potentially contribute scale to its RMBS program.
However in the current environment big banks have become much more competitive with jumbo residential mortgages rates. During the 3Q of 2013, some banks were offering 30-year fixed-rate jumbo mortgages more than 25 basis points below GSE conforming rates. Jumbo loans are generally offered 25 basis points higher than conforming rates.
Two Harbors said it did not expect this trend to be long term and that “hopefully the market would revert to opportunities seen earlier in the year.”
As of September 30, 2013, the company held prime jumbo residential mortgage loans with a carrying value of $119.6 million. The company had $16.2 million outstanding under short-term financing arrangements to fund the prime jumbo mortgage loan collateral.
The mortgage REIT issued two deals in 2013. In August it sold its first RMBS where it used its own depositor, Agate Bay. The trust issued approximately $434 million in senior securities and its underlying collateral consisted of prime jumbo 30-year fixed residential mortgage loans.
In January, Two Harbors teamed with Credit Suisse to sell residential mortgage loans via the securitization market.
The REIT said during its conference call that the two deals, in particular the ability to set up its own program goes some way towards its goal of “developing an industry leading residential mortgage loan conduit.”
