Redwood Trust Inc., the specialist in jumbo mortgages, has gained membership in the Federal Home Loan Bank of Chicago through an insurance unit, becoming the fourth real-estate investment trust to join the network of regional lending cooperatives in a bid to improve its financing.
The company also will seek to buy high-balance mortgages from other members of the government-chartered system through a new facet of the Chicago FHLB’s mortgage partnership finance program, according to a statement today. Mill Valley, California-based Redwood will be the sole buyer of the loans through the initiative for three years, the companies said. The plan needs approval from the Federal Housing Finance Agency.
Lightly regulated investment firms and lenders that lack customer deposits are flocking to the 12 FHLBs for dependable funding, often with better terms than traditional banks or debt markets. Their memberships are drawing scrutiny from the FHFA, which oversees home-loan banks, because they may affect the safety of a system that operates with perceived taxpayer backing.
“Membership in the FHLBC marks an important development for our company and adds to our financing and distribution options for residential mortgage loans,” Redwood President Brett Nicholas said in the statement. “Mortgage loan borrowers, and the communities in which they live, will benefit from the additional liquidity Redwood is able to provide.”
Annaly Capital Management Inc., Invesco Mortgage Capital Inc. and Two Harbors Investment Corp. are the other mortgage REITs that gained access to FHLB funding through insurance units.