Redwood embarks on second RMBS deal of 2013

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Real estate investment trust Redwood Trust ($21.45 1%) [3] is on track with its goal of issuing once [4] a month as the firm embarks on its second private-label residential-mortgage backed securitization deal of 2013.

The deal is underwritten by Royal Bank of Scotland Securities ($10.33 0.62%) [5].

Kroll Bond Ratings pre-rated Sequoia Mortgage Trust 2013-2, giving the majority of the deal's tranches AAA ratings.

Click no the chart to view the expected KBRA ratings.

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Fitch Ratings also pre-rated the Sequoia Mortgage Trust 2013-2, with the expected outlook slated as "stable" and the majority of the tranches also receiving AAA ratings.

Click on the chart to view the capital structure.

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The platform will contain 777 loans in the deal with approximately 98% of the loans in the pool classified as 30-year, fixed-rate mortgages. The remaining loans are a mix of 25-year, 20-year and 15-year fixed mortgages. The total balance of the deal is about $666 million.

The pool mainly contains fixed-rate mortgages, with First Republic Bank mortgage making up the majority of the transaction, or roughly 51% of the loan pool.

Other originators include United Shore Financial Services and Prime Lending, Kroll said.

Geographic concentration was a primary risk posted within in the deal — similar to Redwood’s first [8] deal of the year. 

In this transaction, nonconforming prime mortgages are most frequently originated in those regions of the country where home prices are highest. Additionally, the largest market for First Republic Bank is its base of operations in San Francisco and surrounding areas.

As a result, the geographic concentration of the pool is high, with significant exposure to assets located in California, representing 48% of the entire pool. 

In addition, the weighted average borrower credit score is 773, higher than average for recent Sequoia Mortage Trust transactions and well within the 'prime' mortgage range. 

"Historically, Redwood has generally invested in and securitized high quality jumbo prime mortgages, which have performed well relative to the universe of nonagency securitizations," Kroll noted.

As a result, Redwood has been an active aggregator, issuer of and investor in securitization of residential mortgage loans for more than a decade, highlighting a key credit consideration for the deal. 

cmlynski@housingwire.com [9]