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Redwood Trust's latest residential mortgage-backed securities deal — the fifth this year — shows the firm leaning heavily on the securitization of 30-year, fixed-rate, first lien-mortgages, according to a pre-sale report from Kroll Bond Ratings.
The firm's fifth RMBS transaction of 2012 shows Redwood packaging loans that for the most part contain low loan-to-value ratios, high FICO scores, 100% documentation of income and assets and relatively large balances.
Kroll reviewed the Sequoia Mortgage Trust 2012-5 transaction, which follows the Sequoia Mortgage Trust 2012-4 transaction, announced a few month ago.
Kroll says Redwood, the only firm dealing with rated RMBS securitizations in the secondary marketplace, increased the number of mortgage originators included in its latest RMBS securitization while cutting back on the number of loans with second-liens to enhance the quality and risk of the overall transaction.
"Like the 2012-3 pool, SEMT 2012-5 is comprised primarily of 30-year, fixed-rate first-lien mortgages, with the exception of three 20-year mortgages," Kroll said. "This stands in slight contrast to the previous pool which included 12% 15-year mortgages and 1% 20-year mortgages. LTV and CLTV are also more similar to that of SEMT 2012-3 (67.1 and 68.7, respectively) than that of SEMT 2012-4 (66.4 and 67.6, respectively)."
Mortgage originators included in the pool include First Republic Bank (24.46% of the RMBS pool), PrimeLending (17.01%); Flagstar Capital Markets Corp. (9.33%); Cornerstone Mortgage Co. (6.06%) and other lenders that make up the remaining 43% of the pool.
"The SEMT 2012-5 pool is characterized by substantial borrower equity in each mortgaged property, as evidenced by the average LTV (67.5%) and CLTV (68%)," Kroll wrote. "No loan has an LTV or CLTV greater than 80%. The percentage of the pool at 80% CLTV is 23%. KBRA’s residential mortgage default and loss model is highly sensitive to the increased probability of default associated with high CLTV, particularly when CLTV reaches or exceeds 100%."
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