Redwood Trust Inc., the specialist in so-called jumbo mortgages, sold $619.2 million of home-loan securities in its second deal this month, according to a person familiar with the offering.
The debt was priced to yield 1.85%, or 0.97 percentage points more than benchmark swap rates, said the person, who asked not to be identified without authorization to speak about the transaction. The bonds, which have 7.1% in investor protection, or so-called credit enhancement, received top grades from Standard & Poor’s, Kroll Bond Ratings Inc. and Fitch Ratings.
Since the market revived in 2010 after the credit seizure, Redwood has been the main issuer of nonagency securities, or bonds tied to new mortgages without government backing. The Mill Valley, Calif.-based real estate investment trust has sold bonds backed by $1.1 billion of mortgages this month after about $2 billion in all of 2012, according to data compiled by Bloomberg.
Today’s offering, underwritten by Royal Bank of Scotland Plc, was tied to $666.1 million of fixed-rate mortgages, whose loan-to-value ratios averaged 63.1%, with borrower credit scores of 776 out of a possible 850, according to a presale report by Fitch.
First Republic Bank originated 51.4% of the debt, according to the report. The average loan size was $857,304, and 8.3% of the mortgages had interest-only periods. Borrowers had an average of $1.2 million in liquid reserves, such as cash in the bank.
Jumbo mortgages are those larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in some areas. Limits range from $417,000 to $625,500 for Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20% downpayments.