Redwood Posts $47m Q1 Income After Closing Jumbo RMBS
Redwood Trust (RWT) posted a $47m net Q110 income, compared with $40m of income in the previous quarter, and a $35m net loss in the year-ago quarter. During Q110, Redwood acquired $189m of residential securities and sold $124m of securities, according to a regulatory filing. Redwood said it ended the quarter with $840m of securities in its portfolio, up from $781m at the beginning of the quarter. The company also had $242m of cash and equivalents at the end of the quarter. As interest income continues to decline -- to $58m in Q110 from $82m in the year-ago quarter -- interest expense at the firm has decreased by more than half, to $18m in Q110 from $47m in Q109. The quarterly results arrive after Redwood closed a $238m prime jumbo residential mortgage-backed security (RMBS) consisting of 255 loans originated by CitiMortgage. The deal, rated by Moody's Investors Service, marks the first private-label RMBS of recently originated loans since 2008. "We wanted to be first so we could be 'under the tent,' helping to shape the new structures, debating standards, and trying to inform government policy," Redwood said in the filing. "We know that many important issues will be decided in the early days of new securitizations and we think we are well qualified to weigh in on those issues." "It was an arduous process for us and all who worked with us as together we tried to 'break the ice' to get securitization re-started. While we are encouraged by the response to our first step, we expect it will take some time before processes evolve and the nation again has a fully functioning private mortgage securitization market." Redwood said it took "a vertical slice" of the deal, buying 5% of the triple-A securities. Although the company would not usually retain triple-A securities, Redwood said it did so with the latest RMBS in order to "accommodate alternative risk retention proposals" while final rules are hammered out. Write to Diana Golobay. Disclosure: the author holds no relevant investments.