Redwood Trust — the real estate investment trust dominating the private-label residential mortgage-backed securities sector — is making the private mortgage finance market proud.
Not only has the company priced four deals since the beginning of the year, by far the most out of any issuer in the space, but the REIT also posted its strongest quarterly earnings in the post-financial crisis period.
Redwood (RWT) reported $61 million in net income for the first quarter of 2013, compared to $42 million for the fourth quarter of 2012, doubling from $30 million in 2012.
The increase reflects a higher level of securities investments as the company added $166 million of RMBS created from their Sequoia securitizations.
Meanwhile, during the first quarter, Redwood obtained approval to sell conforming-balance loans to Freddie Mac and is working to obtain similar approval from Fannie Mae.
"We expect to start acquiring agency conforming loans by the end of 2013," Redwood said.
Redwood’s total first quarter revenues for mortgage banking activities were $44 million, of which $37 million was generated from residential activities and $7 million was generated from commercial activities. This is up compared with $24 million of mortgage banking revenues earned from the previous quarter.
Additionally, revenues for residential mortgage banking activities increased by $14 million in the first quarter, as compared to the fourth quarter.
"This increase resulted from a higher volume of loan acquisitions and a higher volume of loan sales through Sequoia securitizations executed at gain-on-sale margins that remained elevated through much of the first quarter, as triple-A spreads remained tight and, therefore, generally favorable to our margins during much of the first quarter," Redwood noted in its report.
Redwood’s Sequoia securitization platform posted its stronger quarter since restarted in mid-2010.
The company completed four securitizations totaling $2.2 billion, compare to two securitizations totaling $651 million from a quarter earlier, and six securitizations totaling $2 billion from last year.
Furthermore, the volume of loans identified for purchase from sellers increased to $3.1 billion, up from $2.2 billion last quarter.
"Driving the increase was a combination of new sellers and increased volume from existing sellers, most of which are relatively new and tend to increase their loan sales to us as they gain experience with out platform and acquisition procedures," the company explained.