Citigroup (NYSE: C) has partnered with Redwood Trust Inc to create the first new mortgage securities without guarantees from the government in more than two years, selling about $222.4 million worth of debt.
The new “AAA” rated securities will pay an initial coupon of 3.75% according to a statement from Redwood, a jumbo-mortgage specialist that issued bonds through an affiliate. Redwood will retain a low-ranking interest in the pool of $237.8 million of loans.
The new offer signals a restart of the jumbo-mortgage securities market, in which $200 billion worth of jumbo-loan securities were issued annually from 2003 to 2006.
The offering ends a drought in the $1.5 trillion non-agency mortgage-bond market, where more than $200 billion of jumbo-loan securities were issued in each year from 2003 to 2006. The underlying loans are safer than ones backing such bonds before housing collapsed, said
Thomas Atteberry of First Pacific Advisors in Los Angeles, commented to Business Week that the loans are higher quality and that the mortgages represent only 60 percent of the value of the properties, makes “me feel comfortable I’m covered if something goes awry.”
