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As the private-label mortgage bond market comes back to life, real estate investment trusts may play the lucrative central role that belonged to banks and Wall Street firms during securitization's precrisis heyday.
April 25 -
Not surprisingly, given how standoffish investors have recently been about mortgage credit risk, the underlying loan pool is by most measures pristine.
April 21 -
Not only has Redwood Trust purchased jumbo loans for a planned nonagency MBS, but is actively shopping the mortgages to rating agencies, according to officials familiar with the company's plans.
April 13
Two years after founding the company known as PennyMac to scoop up distressed mortgages, Stanford Kurland has rejoined a business he knows well from his years at Countrywide Financial Corp.: buying and securitizing newly originated prime loans.
PennyMac Mortgage Investment Trust said in its first-quarter earnings release Tuesday that it had purchased its first handful of such loans in April from community banks and nonbank lenders.
For now, the real estate investment trust is concentrating on loans below the conforming limit that it can securitize with guarantees from Fannie Mae, Freddie Mac and the Government National Mortgage Association. But eventually it hopes to buy and securitize jumbo loans without federal backing.
The REIT, which went public last year, is managed by Private National Mortgage Acceptance Co., the Calabasas, Calif., company that Kurland, the former No. 2 executive at Countrywide, formed in 2008. (He is the chairman and chief executive of both PennyMac entities.)
"We are moving forward with our prime agency conduit," Kurland said in the release. "We will continue to look to play an integral role in the reemergence of the mortgage market."
David Spector, the president and chief operating officer of the REIT (and another Countrywide veteran), said in an interview that community banks may prefer to sell loans to a conduit they do not view as a rival.
"Our competitive edge is in the fact that we're a nonbank conduit," he said. "Independent mortgage bankers and community bankers can feel comfortable when they're selling loans to us that their customers, the customer relationship, is not at risk."
Another reason these lenders will sell to PennyMac, Spector said, is that, "from a risk management point of view, they want more buyers for their product."
Tom Millon, the president and CEO of Capital Markets Cooperative — a Ponte Vedra Beach, Fla., company that provides secondary marketing services to banks — agreed that a need exists for more buyers to compete for loans.
"The last few months, we've seen more new investors like PennyMac trying to come online because of the oligopoly of Wells and B of A," he said. The top four banks — Bank of America Corp. (which bought Countrywide in 2008), Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. — service about 70% of the nation's home mortgages.
Last month Redwood Trust Inc. sold the first jumbo mortgage securitization since the financial crisis began. The $238 million of bonds were met with strong investor demand.
But "there are still obstacles to getting a free-flowing jumbo market opening up again," Spector said.
For example, Senate Banking Committee Chairman Chris Dodd and the Securities and Exchange Commission have each proposed to force securitizers to keep at least 5% of each class of bonds in a deal. Retaining the senior bonds would not generate "an appropriate risk-adjusted return," Spector said.
