Politics & MoneyInvestments

Latest Redwood RMBS deal a little smaller

Real estate investment trust Redwood Trust embarked on its fourth and smallest private-label residential-mortgage backed securitization deal of 2013.

The platform Sequoia Mortgage Trust 2013-4 reported a total loan balance of $805.1 million, more than $200 million higher than the three previously priced transitions by Redwood (RWT). The unpaid principal balance is $576.4 million.

Kroll Bond Ratings pre-rated the deal, giving the majority of the deal’s tranches AAA ratings.

Fitch Ratings also pre-rated Sequoia Mortgage Trust 2013-4, with the expected outlook slated as ‘stable’ with all the tranches also receiving AAA ratings.

Moody’s Investors Service pre-rated the transaction as well, issuing the majority of the deal’s tranches Aaa ratings.

The platform will contain 716 loans in the deal with more than 98% of the loans in the pool classified as 30-year, fixed-rate mortgages. The remaining loans are a mix of 20-year and 25-year fixed mortgages.

First Republic Bank (FRC) mortgages make up the majority of the transaction, or roughly 11.3%.

Other originators include Cole Taylor Bank, PrimeLending, United Shore Financial Services and Fremont Bank, Fitch said.

In addition, the weighted average borrower credit score is 773, higher than the average for recent Sequoia Mortgage Trust transactions as well within the ‘prime’ mortgage range. 

Both credit rating agencies noted that geographic concentration remains a primary risk posted within the deal.

As a result, geographic concentration of the pool was labeled as ‘high’ with significant exposure to assets located in California, representing 42.1% of the entire pool. 

Meanwhile, both Kroll and Fitch reported that the originators limited history is also a concern.

“These smaller originators were not meaningfully active in pre-2012 prime, private label RMBS securitizations and therefore, have a limited track record,” Fitch stated. 

However, as Redwood keeps meeting its monthly issuance goal, both credit rating agencies commend 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.


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