Industry powerhouse Rocket Mortgage started out dabbling in the private-label secondary market slowly, with a single offering in 2019, followed by another in 2020, but it has come out with its engines roaring in 2021.
The nation’s largest mortgage lender has launched a total seven private-label jumbo-loan securitizations between 2019 and early November of this year backed by loan pools valued at $4.2 billion at the time of closings — with five of those offerings undertaken in 2021.
The two securitizations in 2019 and 2020 involved a total of 952 loans valued in aggregate at $715 million. The five deals so far this year, however, dwarf the prior years’ securitization volume — with 3,642 loans pooled in 2021 as collateral for offerings valued in total at $3.54 billion.
All seven private-label offerings have been issued by Woodward Capital Management LLC, a subsidiary of Rocket Mortgage’s parent company, Detroit-based Rocket Companies. The conduit, or shelf, used for the transactions is called RCKT Mortgage Trust.
Rocket Mortgage has originated most of the 4,594 mortgages used to securitize the seven private-label offerings to date. And most of the mortgages involved have been jumbo loans, defined as mortgages that fall outside the range of conventional financing — making them ineligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac.
Between 17% to 50% of the jumbo loans securitized across the seven transactions were originated in California, primarily in the Los Angeles, San Francisco and San Jose markets, according to bond-rating reports from Kroll Bond Rating Agency, Moody’s Investor Service and Fitch Ratings.
Rocket Mortgage did not respond to a request for comment by deadline.
“Rocket Mortgage LLC is a well-established nonbank mortgage originator founded in 1985,” states a pre-sale review prepared by KBRA for Rocket’s latest private-label securitization. “RCKT 2021-5 represents the seventh stand-alone issuance from the RCKT shelf, and Rocket collateral has comprised a substantial portion of … jumbo collateral in various other transactions.
“The organization’s loans (including agency and nonagency collateral) have performed favorably to, or in-line with, the market to date,” the KBRA report continues. “Rocket employs a sophisticated, technology-driven origination process, which has been reviewed by KBRA.”
As the nation’s leading mortgage lender, Rocket now finds itself in the right place at the right time to capitalize on a growing demand for mortgages that fall outside the loan-purchase appetite of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. That growing home-loan demand extends to jumbo loans.
Michael Franco, CEO of SitusAMC, a leading provider of due-diligence review services for mortgage securitizations, says the demand for jumbo loans has been a big driver of private-label securitizations this year.
“You are starting to see more appetite for and an increase in private-label securitizations because of factors affecting the market overall,” Franco said. “The higher securitization volumes are being aided by robust originations, but also by home-price appreciation throughout 2021.
“Because of the sharp price increases, a lot of loans are no longer agency [GSE] eligible but are potentially eligible for [private-label] securitization,” he added. “If you take a look at securitization volume for this year, volume is going to be up.” Franco added that the increase in offerings this year backed by jumbo loans is “materially higher.”
MAXEX, an Atlanta-based digital mortgage exchange in which J.P. Morgan is an investor, issued a report this month on private-label market activity revealing that there were a total of eight jumbo-loan securitizations priced in September alone. They were backed by pools of mortgages valued at $5.73 billion, according to the MAXEX report and additional information from KBRA.
The MAXEX reports indicates that for 2021, through the end of September, total private-label issuance backed by jumbo loans exceeded $33 billion.
John Levonick, CEO of Canopy, which also provides due-diligence and quality control services for secondary mortgage-market transactions, sees the demand for nonagency mortgages originations and securitizations continuing to expand in 2022, beyond even jumbo loans.
“I think we’re going to start seeing in 2022 more nontraditional [mortgage] products, the products that we haven’t seen in five seven, 10 years — interest-only products, [mortgages] that that fall outside the vanilla product offerings that the GSEs consume today,” Levonick said. “… I think if there’s a continued tapering of [mortgage] product types [that can be handled] by the GSEs, then the [private-label] capital markets will have no choice but to pick up the difference.”