Michael McMahon, a Redwood spokesman, declined to comment on its deal. The company, based in Mill Valley, California, has been the biggest issuer since the market restarted in 2010. This year, it’s responsible for $3.1 billion of the total.
Others sellers have included Credit Suisse, JPMorgan Chase & Co. and EverBank Financial Corp., whose President W. Blake Wilson said on a conference call yesterday that its transaction helped its mortgage-sale margins buck an industry trend by rising last quarter. PennyMac Mortgage Investment Trust, run by former Countrywide Financial Corp. executives, said this week it expects its first deal next quarter.
Scott Simon, who heads mortgage-bond investing at Pacific Investment Management Co., called new non-agency securities “insanely expensive” in February. At the time, spreads had been narrower than similar Fannie Mae bonds, according to Credit Suisse. Now they are paying about 10 basis points more, the bank’s analysts said.
Seasoned Debt
In the sale of bonds last month by EverBank, underwriters Bank of America Corp. and Barclays Plc pushed investors seeking higher yielding, junior tranches to also buy the top-rated AAA portions, people familiar with the offering said. Their effort showed demand is greater for the lower-rated bonds with potentially higher returns.
Friedlander, whose Angel Oak Multi-Strategy Income Fund has beaten 98 percent of mutual-fund rivals this year, said that instead of the top-rated debt, he still prefers “seasoned” securities issued earlier with spreads more than 200 basis points higher because credit ratings aren’t a big focus in his strategy.
The non-agency market’s recovery has been driven by investors seeking higher yields as the Federal Reserve keeps interest rates at record lows. At the same time, Fannie Mae and Freddie Mac have raised their bond-guarantee fees and in 2011, the upper limits for the size of the mortgages they can buy were lowered.
Sluggish Growth
The volumes have been limited by banks seeking loans for their own portfolios amid sluggish economic growth. Banks retained 14 percent of new home loans last year, up from 9.6 percent in 2011, helping to scale back the government’s share, according to Amherst Securities Group LP calculations. In the past three quarters, Wells Fargo & Co. retained $22.9 billion of mortgages with balances small enough to place into Fannie Mae and Freddie Mac bonds, according to its disclosures.
Jumbo mortgages are those larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in high-cost areas. Limits range from $417,000 to $625,500 for Fannie Mae and Freddie Mac loans with the lowest costs for borrowers using 20 percent down payments.