Redwood Trust Inc. (RWT:US) plans to sell bonds backed by $313.2 million of new U.S. home loans, in the ninth sale of such securities without government backing since the market froze in 2008, according to credit-rating companies.
Redwood, a specialist in so-called jumbo mortgages, issued six of the previous offerings of such securities since the market restarted in 2010, according to data compiled by Bloomberg. Moody’s Investors Service, Kroll Bond Ratings Inc. and Fitch Ratings expect to assign top grades to $290.4 million of the bonds in the latest deal, according to “pre-sale” reports sent today by e-mail.
Issuance of so-called non-agency home-loan bonds peaked at $1.2 trillion in both 2005 and 2006 before collapsing as their prices tumbled amid soaring foreclosures and plunging home values. The market’s revival is being limited by taxpayer- supported mortgage programs that account for about 90 percent of lending and demand from banks for unsecuritized loans to hold.
Redwood is “hopeful that the stabilizing housing market will reduce pressure on Congress to maintain the government’s current dominant presence in the mortgage market,” Chief Executive Officer Martin S. Hughes and President Brett D. Nicholas said in a quarterly investor letter posted Aug. 2 on the Mill Valley, California-based company’s website.
Michael McMahon, a spokesman for the real estate investment trust, declined to comment on the bond transaction. Barclays Plc is managing the offering, which would be Redwood’s fourth this year, according to Bloomberg data.
Redwood said in its quarterly letter that it expected to conduct a mortgage-bond sale this quarter. It held $383 million of loans as of July 31, and had identified another $518 million it intended to purchase. The REIT has also started reselling some mortgages outside of securitizations.
On its last two mortgage-bond deals, Redwood entered into forward-sales agreements with its underwriter, reducing “our hedging timeframe and costs,” according to the letter.
Credit Suisse Group AG and Chimera Investment Corp. (CIM:US), the New York-based REIT, have teamed on the non-agency market’s other two sales in this year, totaling about $1.2 billion, packaging jumbo mortgages sold mainly in bulk by MetLife Inc.
Jumbo home loans are ones larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in some areas. For Fannie Mae (FNMA:US) and Freddie Mac loans, limits range from $417,000 to $625,500 with the lowest costs for borrowers using 20 percent down payments.
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