Redwood mortgage bond may have failed S&P triple-A test
Redwood Trust's new residential mortgage-backed security may have failed to get top ratings from Standard & Poor's, based on characteristics of underlying loans, according to an investor and a statement released by S&P on Wednesday. The Redwood loans deviated from an "archetypical" pool that S&P uses to benchmark its RMBS ratings. Variations on the archetypical pool include that the loans have adjustable rates and that just 26% are fully amortizing. Credit enhancement for bonds that meet S&P's archetypical pool begin at 7.5%, the rating company said. The Redwood deal, rated triple-A by Moody's Investors Service, had credit enhancement of 6.5%.