Premium Point Investments LP’s WinWater Home Mortgage LLC sold its first U.S. mortgage securities without government backing in a deal tied to about $250 million of loans, showing the market isn’t wholly frozen.
WinWater, created last year to buy jumbo mortgages to package into bonds, sold $81 million of top-rated notes paying 3.5 percent coupons at 100.4 cents on the dollar, according to a person with knowledge of the offering who asked not to be identified citing a lack of authorization to speak publicly. That’s about 1.8 cents on the dollar less than comparable benchmark Fannie Mae-guaranteed bonds, according to data compiled by Bloomberg.
After reviving from the paralysis caused by the 2008 financial crisis the debt helped spark, issuance of non-agency securities has slowed as banks seek jumbo loans to hold as investments and bond buyers pay less. Prices on recently-issued AAA securities fell to as low as 4 cents on the dollar below similar agency bonds toward the end of last year, after fetching higher prices early in 2013, according to JPMorgan Chase & Co.
Redwood Trust Inc., the biggest issuer last year, ended its four-month absence from the market in March, selling some top-rated notes at about 2.7 cents on the dollar less than Fannie Mae bonds. That debt carried less protection against losses known as credit enhancement than the $81 million of WinWater notes, totaling 10.4 percent compared with 15 percent.
WinWater’s deal also included $16.8 million of top-rated 3.5 percent securities with 8.3 percent credit enhancement that priced at 99.4 cents on the dollar, the person said.
The New York-based company is partly owned by certain principals of Premium Point, the hedge fund run by former Deutsche Bank AG banker Neil Ahuja, and shares resources, employees and offices with that firm, according to a report by Kroll Bond Rating Agency, which joined Standard & Poor’s and DBRS Ltd. in planning to grade the debt.
While total issuance of non-agency securities tied to new loans jumped to $13.4 billion last year from $3.5 billion in 2012, the sales collapsed after September, Bloomberg data show. Issuance totals about $2 billion so far this year. Sales peaked at $1.2 trillion in both 2005 and 2006.
Citigroup Inc. is also planning a jumbo-mortgage deal tied to $219 million of loans, its second of the type since the crisis, according to DBRS.
Jumbo mortgages are those larger than allowed in government-supported programs. Limits range from $417,000 to $625,500 for Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments.