Mortgage Issuers Announce Deals Totaling $810 Million
May 11, 2011
The largest transaction was from Imperial Credit Mortgage Holdings, which priced a $270 million offering of nonconforming A-quality mortgages, sold through its ICI Funding Corp. subsidiary. Bear, Stearns & Co. was lead underwriter for the deal. These loans do not qualify for securitization under an agency guarantee program because they have been made to self-employed people, have high loan-to-value ratios, are for investment properties or for other reasons. Dalia Fortenberry, senior managing director in mortgage research at Bear Stearns, said deals backed by these loans are attractive to investors because they trade at ``very wide'' yield spreads to Treasurys compared to other mortgage-backeds. The yield spread is the difference in the yield of a given debt instrument and that of a similar-term Treasury issue. At the same time, they show prepayment behavior at least as stable as agency pass-throughs. Prepayments, which occur when homeowners sell, refinance, or make larger-than-scheduled mortgage payments, erode the value of mortgage-backed securities because they return principal early and reduce interest earnings. A pass-through is a security made up of a pool of debt instruments, with the income from the debt passed through an intermediary -- usually a government agency or investment bank -- to the investors. In addition, Federal Home Loan Mortgage Corp. on Wednesday announced a $200 million offering of callable pass-throughs. Callable means the issuer reserves the right to redeem the bonds before they mature. Donaldson, Lufkin & Jenrette Securities Corp. is the underwriter. Also priced Wednesday was a $190 million offering for Norwest Mortgage Inc., the nation's largest mortgage originator. Sold under Norwest's NASCOR label, the transaction was underwritten by PaineWebber Inc. and is backed by 30-year fixed-rate mortgages. Wednesday also saw Freddie Mac announce a $150 million real-estate mortgage investment conduit underwritten by Morgan Stanley Inc. and backed by 7.5% Government National Mortgage Association 30-year pass-throughs. A real-estate mortgage-investment conduit, or Remic, is a type of a collateralized mortgage obligation -- or a pool of thousands of residential mortgages -- packaged into a variety of bonds. The securities are divided into classes with different maturities and cash-flow patterns aimed at meeting specific investment objectives. Meanwhile, the agency pass-through market again registered smaller losses than Treasurys. Thirty-year pass-throughs dropped 2/32, less than the 3/32 loss on the comparable 10-year Treasury note. The outperformance continues the trend seen over much of the past two weeks.
VastPress 2011 Vastopolis
