Shellpoint Partners looking to sell $251M in residential mortgage-backed securities
Move signifies return of nonagency mortgage bond market
Mortgage-bond pioneer Lewis Ranieri’s Shellpoint Partners is looking to sell at least a quarter billion worth of home loan-backed securities, signifying the return of the market for nonagency mortgage bonds, the Wall Street Journal reported.
The bonds are backed by large loans sans a government guarantee, as opposed to the majority of housing loans that are sold through government-connected agencies such as Fannie Mae, Freddie Mac and Ginnie Mae. Growth of the “nonagency” market is seen as an essential mode of reducing the housing market’s reliance on taxpayers, who shelled out billions to support Fannie Mae and Freddie Mac during the financial crisis and recession.
The nonagency market has been among the slowest of debt markets to recover, as investors who suffered heavy losses in the recession were skittish, and banks found it more lucrative to hold loans they made rather than spin them off as securities. But this year, issuers have sold over $7 billion worth of loan-backed securities, a sharp jump from $1.5 billion in the same period last year, according to Bank of America Merrill Lynch data seen by the Journal.
Shellpoint said in May that regulators had given it permission to issue up to $2 billion of mortgage bonds without a government-guarantee. However, the company has assured investors it will not put in a controversial “sunset” clause that puts a time limit on investors’ ability to to force repurchases of faulty loans, the Journal said. [WSJ] — Hiten Samtani