Redwood Trust is now a veteran when it comes to private-label residential mortgage-backed securities issuance. However, its latest deal features more loan sellers selling into the pools than ever before.
"Redwood pools have exhibited a steady migration towards a larger number of loan sellers leading to less concentration in any single seller," said the presale report from Kroll Bond Ratings. "SEMT 2013-10 continues that trend, with 72 sellers contributing loans to the pool and only two sellers with a contribution over 5% each."
"While seller diversity helps reduce geographic concentration, it also increases exposure to the underwriting standards and processes of sellers with limited jumbo mortgage loan performance history," the agency warned, noting the ability of these sellers to meet representations and warranties may pose a risk.
Fitch Ratings, in its presale, said the risk is muted even though the majority of the pool is originated by lenders with limited non-agency history.
"The lack of performance history is partially mitigated by the 100% third-party diligence conducted on these loans that resulted in immaterial findings," said the report. "Fitch also considers the credit enhancement on this transaction sufficient to mitigate the originator risk."
Moody's Investors Service notes that collateral is weaker than usual, but still relatively strong.
The real estate investment trust is exceeding pace of its monthly issuance goal, setting out on its tenth private-label residential mortgage-backed securitization deal of the year — the second transaction this month.
Over the past year, many new sellers have been added to the Redwood deals. The high quality of loans, loan file reviews of nearly 100% of mortgages in the pools and generally positive results for the rile reviews has resulted in the number of seller increases, analysts for Kroll explained.
Additionally, the platform Sequoia Mortgage Trust 2013-10($0.00 0%) reported a total balance $400.7 million.
Kroll Bond Ratings pre-rated the deal, giving the majority of the deal’s tranches AAA ratings.
The platform will contain 529 in the deal with the pool comprised entirely of fully amortizing fixed-rate mortgages, with two having 20-year terms and the remainder having 30-year terms.
PrimeLending mortgages make up 8.5% of the transaction, while ‘other’ originators represent the majority of the deal, or roughly 83.9%.
In addition, the weighted average borrower credit score is 775, well within the prime mortgage range and in line with recent Redwood deals.
However, a concern from the credit rating agency is the presence of very large loans.
While the large loans generally exhibit strong credit characteristics, property valuations of luxury homes can be complex and subject to more volatility than valuations of conventional properties, Kroll stated.
On the other hand, a strength of the deal features experienced servicers.
CitiMortgage ($52.21 -0.45%) has significant experience as a master servicer and currently provides servicing on more than $15.9 billion of loans. Additionally, its corporate credit quality provides the company with ability to fulfill its back-up advancing obligations, according to the credit rating agency.
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.