PennyMac Mortgage Investment Trust (PMT) said it continues to develop a conduit for new prime mortgages and expects the first small-scale bulk transaction to occur early in Q210. Conduit funding is common in securitization, where the investment vehicle issues securities based on pools of mortgages held in trust and the PennyMac announcement is indicative of financial maneuvering in anticipation of a restart to the structure finance markets. The mortgage real estate investment trust (REIT) allocated a portion of the funds from its July 2009 $335m initial public offering (IPO). PennyMac said its plans to leverage the operating platform, licenses, and approvals of PennyMac Loan Services (PLS) and investment manager, PNMAC Capital Management (PCM) for the conduit. “We believe that PMT is well positioned for the various opportunities that are opening up in the marketplace,” said PennyMac chairman and CEO Stan Kurland. “We have worked diligently to deploy our capital in an appropriate manner and position PMT to capture additional value through the re-emergence of the securitization market, as well as filling the void in the conduit space.” PennyMac said it deployed nearly 70% of the IPO, approximately $225m in distressed whole mortgages and mortgage-backed securities (MBS). The PennyMac REIT launched in July 2009 and investor demand for the IPO was lukewarm. Led by Kurland, the former president of Countrywide, PennyMac announced in May 2009 its intentions to raise $750m, but was later forced to cut that projection back by more than 50%, to $335m. PennyMac recently completed the purchase of $56m in whole mortgages, bringing its total whole loan investment to $132m. In addition, PennyMac finalized the purchase of $93m in MBS debt. Going forward, PennyMac is in the process of purchasing an additional $42m in additional whole mortgages, which it expects to close in April. “Our approach to evaluating opportunities continues to be measured; however, we are pleased with our recent increased investment activity,” said Kurland. “We believe that these transactions should add considerable value to our current portfolio of residential whole loans and securities. Our team has worked very hard to put together a diverse portfolio of investments that we believe can provide returns and dividends consistent with our investment objectives.” Market activity continues to accelerate with considerable sales of distressed non-performing assets by large financial institutions; Kurland said the beginning re-emergence of the securitization market may create an opportunity for PennyMac to enter into securitizations or other means to provide financing for its portfolio. “The proceeds from these transactions, together with the cash otherwise generated from our existing portfolio would provide additional proceeds for us to continue to pursue investment opportunities,” he said. Write to Austin Kilgore. The author held no relevant investments.
Seeking Securitization, PennyMac Set to Launch Prime Mortgage Conduit By Q210
March 29, 2010, 4:47pm
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