Politics & MoneyInvestments

Redwood maps out geographically diverse RMBS deal

It’s like clockwork.

Real estate investment trust Redwood Trust is exceeding its monthly issuance goal, setting out with its sixth and most geographically diverse private-label residential mortgage-backed securitization deal of the year.

The platform Sequoia Mortgage Trust 2013-6 reported a total unpaid principal balance of $424.9 million when assessing the planned transaction. Additionally, a total loan balance of $779.7 million is expected. 

Kroll Bond Ratings pre-rated the Redwood (RWT) deal, giving the majority of the deal’s tranches expected AAA ratings.

Fitch Ratings also pre-rated the deal, with the expected outlook slated as ‘stable,’ giving the deal’s tranches expected AAA ratings.

The collateral pool is geographically diverse, resulting in a well-balanced deal.

For instance, the percentage in the top three metropolitan statistical areas is 19.3%, the lowest concentration to date, Fitch said.

Concentration in California accounts for 37.1%, also the lowest to date compared to previous Redwood transactions. 

The platform will contain 545 loans in the deal and the pool was comprised of 99.9% 30-year, fixed-rate mortgages and 0.1% of 25-year, fixed-rate mortgages.

Shore Financial Services mortgages make up 7.7% of the transaction, while ‘other’ originators represent the majority of the deal, or roughly 71.2%. 

In addition, the weighted average borrower credit score is 771, higher than the average recent Redwood deals as well as within the ‘prime’ mortgage range.

However, a concern for the credit rating agencies is the entire pool was originated by lenders with limited nonagency performance history.

“Fitch believes the lack of performance history is partially mitigated by the 100% third-party diligence conducted on these loans that resulted in immaterial findings,” the credit rating agency explained. 

Nonetheless, as Redwood keeps meeting its monthly issuance goal, Kroll commended 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. 


3d rendering of a row of luxury townhouses along a street

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