Redwood Has Big Plans for Non-Agency MBS, Strong 3Q Earnings

Redwood Trust, the most active securitizer of jumbo loans in the nation, earned $40 million in the third quarter–double of what it took in 2Q–and unveiled plans to ramp up nonagency loan production over the next 12 months and beyond so it can securitize $300 million or more each month.

In its just-released "Redwood Review" the firm boasted that it has “46 potential sellers who are in various stages of review and implementation, most of whom we expect will become active sellers in the near term.”

At the end of September, the Mill Valley, Calif.-based nonbank had 49 active residential loan sellers, up from 37 at June 30. It hopes to have 55 (correspondent) sellers by year end.

Many of its correspondents are regional and community banks that serve borrowers looking to lock-in long-term loans at historically low mortgage rates.

Its earnings release came after the market closed on Thursday. In after hours trading its stock rose slightly.

Redwood says in its quarterly review that the liquidity it provides “provides these banks with the ability to originate competitively priced 15- and 30-year fixed-rate mortgages without having to incur the interest rate risk normally associated with holding these loans over the long term. Many of our loan sellers also appreciate that Redwood is not a bank and, therefore, not a direct competitor for their customer relationships.”

The company securitizes jumbos through its Sequoia residential platform. It closed a $313 million securitization on Sept. 21, and then another at the end of October for $320 million.