Private-label RMBS deal expected by May
Two Harbors Investment Corp. (TWO) and its partner in a new residential mortgage-backed securities deal, Barclays Bank, agreed on a May 17 deadline for the issuance, according to a filing with the Securities and Exchange Commission last week. The two firms said in May they would be targeting a $250 million RMBS deal using a warehouse line to gather the jumbo mortgages. Barclays Bank is a unit of global financial services firm Barclays (BCS). Should this RMBS deal get to market, it would be the fourth private-label offering since the financial crisis struck in 2007 and credit markets froze. Since then, Fannie Mae, Freddie Mac and Ginnie Mae funded more than 95% of all mortgages. Congress voted in December to raise the guarantee fees Fannie and Freddie charge originators to pay for the payroll tax cut extension. The fees are set to increase in April. In October, the elevated conforming loan limits on the mortgages Fannie and Freddie could guarantee were allowed to expire as well. The policy change could stoke some new competition from the private market, according to Republicans looking to shrink the government's role in the mortgage business. All three private-label deals came from California-based Redwood Trust (RWT), which is planning two more for this year. Two Harbors and Barclays built a $100 million mortgage loan warehouse facility, which matures May 16. Should Two Harbors, the seller in its deal, fail to deliver the security before May 17, Barclays, which is the initial purchaser, would agree to buy the assets. According to the agreement, Two Harbors must obtain a AAA rating on the security from at least one ratings agency. According to the filing, the two firms still have the option to agree on extending the May 17 deadline. Two Harbors also said in the filing that it would comply with the still-pending risk-retention rules being finalized under the Dodd-Frank Act. Write to Jon Prior. Follow him on Twitter @JonAPrior.