Shellpoint's Second Sale Follows Restructured First Deal

Shellpoint Partners LLC, the lender backed by mortgage-bond pioneer Lewis Ranieri, in planning its second sale of home-loan securities without government backing, does so after restructuring of its initial transaction and offering higher relative yields to attract investors.

As previously reported, the latest deal is backed by $308.6 million of prime jumbo loans, representing a pool with “substantial borrower equity in each mortgaged property,” Kroll Bond Rating Agency said Thursday in a presale report email.

Shellpoint’s $251 million offering in June came after credit markets were roiled by mounting expectations the Federal Reserve will scale back its $85 billion of monthly bond purchases, and growing issuance of debt known as nonagency mortgage securities that challenged demand.

The largest portion, a $158.8 million top-rated slice, provided protection against losses of 20% on the underlying loans, up from 10% in the initial terms. The debt was sold at a spread of 2.85 percentage points, up from the 2.45 percentage points offered earlier on top-rated notes.

In Shellpoint’s latest deal, Kroll said it expects to grant AAA ratings to $285.3 million of notes with credit enhancement of 7.9%. About 1.2% of the underlying loans are to foreign nationals with no credit scores, the ratings firm said. In the earlier deal, about 5% of the pool was to individuals from outside the U.S.

Sales of nonagency mortgage securities have been building after freezing five years ago amid tumbling home values and soaring defaults, following issuance of $1.2 trillion in each of 2005 and 2006. Deals tied to new loans total about $12 billion this year, up from $3.5 billion in all of last year, according to data compiled by Bloomberg.

Jumbo home loans are ones larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in high-cost areas. For Fannie Mae and Freddie Mac loans with the lowest costs for most types of borrowers, limits range from $417,000 to $625,500.