Redwood Trust soon will market another new jumbo MBS deal—this one, like the others—dominated by California mortgages which comprise just over 49% of the bond.
A new report from Fitch on the Sequoia Mortgage Trust security notes that the bond is backed by 331 loans with combined balances of $293.6 million. The MBS will have rated classes ranging from a top tier rating to a speculative grade rating of BBsf.
Redwood, a publicly traded REIT, is the only firm to issue jumbo securities on a regular basis since the housing bust four years ago.
Fitch said the deal continues a trend toward a greater percentage of loans from originators with more limited performance histories (57%). But it also noted that the loans were reviewed by a due diligence firm with “immaterial findings,” a move the ratings agency said it considers sufficient to mitigate the originator risk.
Among other things, the ratings agency also noted that the most recent deal’s geographic concentration risk has slightly improved compared to past Sequoia transactions aggregated by Redwood. For example, the Texas concentration in the pool is 13%. In the last deal, New York and Massachusetts represented 13% of the pool. A state like Texas generally has more stable home prices than states like Massachusetts and New York, Fitch said.
DataQuick president John Walsh, whose company tracks regional housing trends in California markets such as the Bay Area, said jumbo securitizations by Sequoia (to date) have not had a “meaningful” influence on local market numbers, but if more jumbo issuers follow suit, securitization could become more influential.
