Redwood Said to Sell Fourth MBS Offering Since 2008 Credit Markets Seizure
Redwood Trust Inc. (RWT) sold bonds tied to about $405 million of new U.S. home loans, the fourth sale of such debt without government backing since credit markets seized in 2008, according to a person with knowledge of the offering.
A $179.7 million, top-rated portion yields 2.83 percent, or 1.90 percentage points more than benchmark swap rates, said the person, who declined to be identified without authorization to speak about the deal. The debt had been marketed at spreads of 2 percentage points to 2.1 percentage points. Mill Valley, California-based Redwood, which focuses on so-called jumbo loans, issued all three prior non-agency transactions.
Redwood’s offerings, backed by a total of less than $1.5 billion of mortgages, followed the collapse of the market as prices tumbled, foreclosures soared and home values plunged, helping spark the worst financial crisis since the 1930s. Issuance peaked at about $1.2 trillion in each of 2005 and 2006, and may total $5 billion this year, according to JPMorgan Chase & Co. (JPM) analysts.
The market is “not dormant, but we expect it to be largely closed,” Dale Westhoff, the global head of structured products research at Credit Suisse Group AG (CS), said today during a presentation to reporters in New York. Zurich-based Credit Suisse has managed Redwood’s last three deals.
Government-supported mortgage programs and demand from banks have been limiting the supply of home loans that Wall Street banks and other issuers can package into bonds, JPMorgan Chase analysts led by Matthew Jozoff said in a Nov. 23 report discussing their outlook for 2012.
Other issues include limited demand for the portions of securitizations most exposed to defaults as home prices decline, tougher rating companies and unfinished regulation on issuers’ obligation to retain parts of their deals, Westhoff said.
Michael McMahon, a spokesman for Redwood, declined to comment.
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