JPMorgan Chase & Co. (JPM:US) is planning a $303.7 million sale of U.S. home-loan bonds without government backing, adding to evidence that the market for the securities is beginning to pick up steam.
The deal will be tied to $303.7 million of prime 15-year mortgages, according to a person with knowledge of the transaction who asked not to be identified without authorization to speak publicly. While most of the loans had original balances larger than the current threshold for jumbo mortgages, the market’s focus since its revival, 14.5 percent of the debt is smaller than $400,000, the person said.
Premium Point Investments LP’s WinWater Home Mortgage LLC yesterday completed its first non-agency bond transaction, a deal tied to about $250 million of jumbo loans, and Citigroup Inc. (C:US) is planning a similar $219 million deal. After reviving from the paralysis caused by the 2008 financial crisis the debt helped spark, issuance of non-agency securities had slowed after the middle of last year as banks seek jumbo loans to hold as investments and bond buyers pay less for the debt.
While total issuance of non-agency securities tied to new loans jumped to $13.4 billion last year from $3.5 billion in 2012, sales collapsed after September, according to data compiled by Bloomberg. Issuance totals about $1.8 billion this year. Sales peaked at $1.2 trillion in both 2005 and 2006.
Jumbo mortgages are those larger than allowed in government-supported programs. Limits now range from $417,000 to $625,500 for Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments.
The average age of the loans in the JPMorgan transaction is about one year, with 5.2 percent of the mortgages older than 30 months, the person said. First Republic Bank originated 55 percent of the mortgages, while JPMorgan’s bank made 38 percent, the person said.
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