Wednesday, April 21, 2010

Private-Label Securitiztion Market Starts to Thaw with Jumbo Prime RMBS

Original posted on the Housing Wire by Diana Golobay:

A prime jumbo residential mortgage-backed security (RMBS) deal being structured in the private-label market appears ready to thaw the long freeze of credit in securitization, according to sources.

The deal, Sequoia Mortgage Trust 2010-H1, will consists of 255 first lien mortgages secured by single-family residential properties –110 in California alone — according to a preliminary term sheet filed today with the Securities and Exchange Commission (SEC).

The loans bear approximately $222.38m of principal balance, with an average $932,700 principal balance per loan. The loans bear a weighted average seasoning of eight months, and a weighted average original loan-to-value ratio of 56.57%. The weighted average original credit score for the borrowers is 768.

There is no loan level data available in the filing, though the deal is set to be publicly-placed and closed by April 28, and more information may be available then, sources tell HousingWire.

CitiMortgage acts as the originator and servicer, while Wells Fargo Bank is listed on the preliminary term sheet as the trustee on the deal. Redwood Trust is named as the seller and sponsor, while Sequoia Residential Funding is the depositor. Moody’s Investors Service is expected to assign a triple-A rating on the bonds, which bear an initial subordination of 6.5%, according to the term sheet.

The American Securitization Forum (ASF) was quick to comment on what would be the first private-label security backed by newly originated mortgage loans to be issued since 2008. The ASF issued a statement to “welcome” the deal being structured by Redwood Trust. A spokesperson for Redwood declined to comment.

“Today’s transaction signals that the private RMBS market is beginning to return, but it does not signal that RMBS has returned,” said ASF executive director Tom Deutsch, in an e-mailed statement. “The market is extremely fragile and we need to be very careful, especially as policymakers consider new regulation, that we act thoughtfully to ensure vitally needed private credit starts flowing again to American consumers.”

In the email, the ASF said the new deal appears to follow a few Project RESTART principles, an initiative designed to rebuild investor confidence in MBS and restore the flow of capital to the securitization markets. The detailed information required under the initiative aims to provide securities investors with the data needed to monitor the deal’s performance.

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