PennyMac is mostly focused on distressed investments and home lending through federal programs. However, the company is looking to join a small but growing list of bond issuers that finance residential housing without government guarantees.
"Private-label securitization of jumbo loans is a significant new opportunity for PennyMac," said Stanford Kurland, president of the company, in earning transcripts released today.
He added, "These securitizations will likely utilize a senior/subordinated structure where PennyMac would retain some or all of the subordinate and I/O tranches as REIT investments."
Sales of private-label RMBS last quarter reached about $4 billion, already exceeding the $3 billion average for each year since the housing collapse, according to PennyMac.
However, issuance is still far from the peak levels between 2003 and 2007, but policymakers are encouraging private issuers to play a bigger role in the mortgage market.
Fannie Mae and Freddie Mac have been the dominant issuers of RMBS for the past six years – representing roughly 95% of the market.
PennyMac noted that it locked in $100 million in home loans in the first quarter and would target a securitization of $250 million to $350 million in the third quarter.
In a securitization, PennyMac would sell senior bonds to other investors and keep the riskier slice of the investment, according to transcripts.