Redwood gears up for latest RMBS deal
Talk about consistency.
The platform Sequoia Mortgage Trust 2013-8 reported a total unpaid principal balance of $460.2 million when assessing the planned transaction. Additionally, a total loan balance of $763.1 million is expected.
Kroll Bond Ratings pre-rated the Redwood (RWT) deal, giving the majority of the deal’s tranches expected AAA ratings.
Fitch Ratings also pre-rated the deal, with the expected outlook slated as 'stable,' giving the deal’s tranches expected AAA ratings.
Moody's Investor Service expects to rate the deal as well, issuing preliminary ratings that give the deal's tranches expected AAA ratings.
Both credit ratings agencies pointed out the geographically diverse pool of the deal, but while Kroll considers such geographic concentration a concer, Fitch remains neutral.
Kroll explained that the geographic concentration in pools of jumbo, prime mortgages can be relatively high and noted that this deal has significant exposure to assets located predominately in California.
While Fitch does not dispute the majority of the pool’s concentration risk, the concentration is similar to recent Redwood transactions, which ranged from a low 20.7% to a high of 37.6%.
The platform will contain 603 loans, comprised of 98.6% 30-year fixed-rate mortgages, 0.6% 20-year FRMs and 0.1% 25-year FRMs.
George Mason mortgages make up 6.4% of the transaction, while 'other' originators represent the majority of the deal, or roughly 75.5%.
In addition, the weighted average borrower credit score is 771, in line with recent Redwood deals as well as within the 'prime' mortgage range.
However, a concern for the credit rating agencies is that the lenders have limited history.
Ironically enough, the percentage of small originators has increased from 5% in Redwood’s second deal of 2011 to 100% in its previous deal before this one.
"These smaller originators were not meaningfully active in pre-2012 prime, private-label RMBS securitizations and, therefore, have a limited track record," Fitch explained.
Nonetheless, as Redwood keeps meeting its monthly issuance goal, Kroll commended the REIT as an experienced aggregator, issuer and investor in RMBS securitizations.
"Historically, Redwood has generally invested in and securitized high-quality jumbo prime mortgages, which have performed well relative to the universe of non-agency securitizations," Kroll said.