BlackRock to finance mortgages for custom RMBS
A $1 billion BlackRock (BLK) Mortgage Investors Fund will finance prime jumbo mortgages for a new version of a private-label residential mortgage-backed security, as Reuters first reported Thursday. But unlike the old RMBS issuance, BlackRock said this product will separate the originator of the loan and the servicer, a conflict of interest many investors feel have left them out in the cold as modifications and refinancing demand grew. According to BlackRock, the fund expects to support $100 million to $250 million in mortgages per quarter. Fannie Mae, Freddie Mac, and Ginnie Mae-financed Federal Housing Administration loans taking 90% of the mortgage market. Private-label RMBS have been scarce aside from potentially two put together by Redwood Trust (RWT) and another from PennyMac Mortgage Investment Trust (PMT). Talcott Franklin, a lawyer pursuing investor rights in securitization transactions, said loans in old RMBS were being serviced by the originator. This conflict of interest, he said, came from the lender always siding with the homeowner is loss mitigation to keep the loan from defaulting and reappearing on its books as a loss. Instead, the investor was left on the hook. But under the new BlackRock structure, loans will be handled by separate servicing firms to ensure independence. Write to Jon Prior.