Redwood to Sell Securities Backed by $576.4 Million of Mortgages

Redwood Trust Inc., the specialist in so-called U.S. jumbo mortgages, plans to sell bonds backed by $576.4 million of home loans in its fourth sale this year as issuance of the debt accelerates.

With loan-to-value ratios averaging 64 percent, the transaction offers “even stronger levels of borrower equity” than Redwood’s other recent offerings, Kroll Bond Rating Agency said today in an e-mailed statement. While Kroll said the deal’s risks are heightened by some originators’ lack of “significant jumbo mortgage loan performance history” the firm is granting its top grades to $540.4 million of the securities.

Fitch Ratings plans to assign AAA grades to the same portions of Redwood’s deal as Kroll, and grant rankings from AA to BB on additional securities, according to a so-called pre-sale report from that firm.

Redwood, the leading issuer of so-called non-agency mortgage bonds without government backing, created securities tied to $1.7 billion of loans in transactions earlier this year, almost double the total sales during all of 2010 and 2011, according to data compiled by Bloomberg. The Mill Valley, California-based real-estate investment trust told investors last month that it expects to acquire and securitize $7 billion of loans this year.

Issuance across the market tied to new loans totaled $3.5 billion last year as the market revives after helping cause the global financial crisis in 2008, Bloomberg data show. Credit Suisse Group AG, the only other issuer as the market recovers, also completed a $422.2 million-deal last month, the data show.

Jumbo home loans are larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in some areas. For Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments, limits range from $417,000 to $625,500.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE