EverBank Joins JPMorgan as Mortgage-Bond Sales Near 2012 Total

EverBank Financial Corp. sold securities tied to $307 million of new U.S. home loans without government backing, a day after a deal by JPMorgan Chase & Co., as issuance in the so-called non-agency market accelerates.

The transaction by EverBank included $207.6 million of top-rated securities with 2.5 percent coupons that priced at 100.6 cents on the dollar, said a person familiar with the offering, who asked not to be identified because they weren’t authorized. The bonds are backed mainly by 30-year fixed-rate mortgages, according to a report today by Moody’s Investors Service.

Non-agency issuance so far this year is now tied to almost $3.2 billion of new loans, compared with $3.5 billion in all of 2012, according to data compiled by Bloomberg. Investors have paid too much in many of the deals, sometimes accepting lower yields than available on government-backed bonds while buying notes with more volatile prepayments, said Scott Simon, Pacific Investment Management Co.’s mortgage-bond head. Fannie Mae’s 30-year, 2.5 percent securities trade at less than 99 cents on the dollar, Bloomberg data show.

“If a meaningful amount were attempted to be originated this way, the yields would be massively higher,” said Simon, whose Newport Beach, California-based firm manages the world’s largest bond fund.

EverBank, which is based in Jacksonville, Florida, offered “unambiguous” contractual protections to investors against misrepresented loans, according to Moody’s. The ratings firm said in a March 22 report that the top grades granted by rivals to portions of the deal from New York-based JPMorgan weren’t appropriate because the covenants could prevent repurchases of bad loans.

Rising Issuance

Issuance is rising after the size of mortgages that government-supported Fannie Mae and Freddie Mac can finance fell and their bond-guarantee fees increased as policy makers seek to scale back their roles, while investors flock to assets with potentially higher returns as the Federal Reserve suppresses yields on notes with less default risk.

Credit Suisse Group AG and Redwood Trust Inc. had been the only issuers since the market revived in 2010. Sales peaked at $1.2 trillion in both 2005 and 2006 before collapsing as prices tumbled amid soaring foreclosures and plunging real-estate values, sparking a global financial crisis in 2008.

JPMorgan’s sale yesterday included $326.3 million of top-rated securities with 2.5 percent coupons that priced at about

101.7 cents on the dollar, said a person familiar with that offering who declined to be identified because they weren’t authorized to speak about the transaction.

Those bonds were backed by a mix of fixed- and adjustable-rate mortgages with varying lengths, according to a report last week by Fitch Ratings, which gave them AAA ratings.