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Investments

REIT Invesco acquires stake in $300M RMBS pool

Pool contains recently originated fixed-rate mortgages

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Real estate investment trust Invesco Mortgage Capital (IVR) increased its play in the residential mortgage-backed securities sector by acquiring an interest in a securitized pool of prime residential mortgages with an unpaid principal balance of $300 million.

The deal, while large, comes not long after the firm’s earnings showed it hedging against exposures from potential interest rate hikes in the mortgage space.

The REIT, which finances and manages residential and CMBS transactions, said the new pool contains recently originated loans — often a signifier of higher quality underwriting.

The acquired RMBS pool contains 398 fixed-rate loans with an original loan term of 30 years. Invesco plans to consolidate all of the underlying assets and liabilities of the securitized trust for financial reporting purposes, the company said.

The news accompanied another major announcement, with Invesco’s board authorizing the repurchase of another 20 million shares of common stock with no expiration date.  Already in the fourth quarter, share repurchases authorized by the board two years ago have reached $102.9 million, accounting for 6.84 million shares with an average price of $15.02 per share.

Despite the recent transaction, Invesco has spent the past few months focused on reducing its exposure to interest rate risk. In its recent third-quarter results, Invesco sold agency mortgage-backed securities, resulting in a loss on sale of $69.3 million, or 51 cents a share, compared to a net gain of $5.7 million, or 4 cents a share, in the second quarter.

And while the RMBS deal shows Invesco is still interested in the mortgage space, its MBS overall portfolio shrunk mid-year, falling to $18.8 billion in September -- down $1 billion from the prior quarter. 

Its MBS portfolio generated less interest income in the third quarter, bringing in a total of $171.3 million, down by $4.4 million from the quarter ending in June.

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