Redwood closes $290 million jumbo RMBS

Redwood Trust (RWT) successfully closed its $290 million prime jumbo residential mortgage loan securitization, the only private deal of its kind this year. The securitization classes were sold to institutional investors by the underwriters, Credit Suisse (CS) J.P. Morgan Securities (JPM), and Jefferies & Co. (JEF). The most senior securities issued in the securitization, representing 92.5% of the principal amount of the securitization, were rated triple-A at the time of issuance by Fitch Ratings. Redwood pulled its ratings deal with Moody’s Investors Service after the agency claimed a high risk of earthquakes in San Francisco, where the lion’s share of property exists, while the bonds mature. Martin Hughes, Redwood President and CEO, pointed to the deal as helping the Treasury achieve its distant goal of reducing the housing fiance roles of the government-sponsored enterprises Fannie Mae and Freddie Mac by boosting private market money into mortgage investments. “This transaction also supports our belief that triple-A investors will provide attractive financing for prime residential mortgages provided their demands for enhanced disclosure transparency, alignment of interests, high quality collateral, and structural protections are responded to with improvements in these areas,” said Hughes. “We look forward to the potential roll-back at the end of September 2011 of the temporary increase in the conforming loan limits applicable to Fannie and Freddie, which would increase the share of the mortgage market for the private sector and reduce future risk to taxpayers.” Redwood has yet to release a great deal of information on the finals of the Sequoia 2011 platform. Redwood COO Brett Nicholas said that economics of the transaction closed competitively, within 0.5% of the rates on offer by Fannie and Freddie. “”The pricing of this securitization transaction suggests that fears of residential mortgage rates rising by 100 to 150 basis points unless there is government backing through Fannie Mae or Freddie Mac appear to be unfounded,” he said. Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.

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