$5 Billion Portfolio Trades

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MORTGAGE EXPERT
8 · 15 · 07

More than $5 billion in residential mortgages has traded hands and nearly $6 billion more is on the block.

The $5.1 billion sale was announced today by KKR Financial Holdings LLC.

The San Francisco-based company said it converted from a real estate investment trust to a limited liability company in May and no longer intends to invest in residential real estate assets.

KKR noted its mortgage investments consisted of borrowers with a weighted average FICO score of 728 and a weighted average loan-to-value of 71 percent. The $5.1 million sale will result in a $40 million charge.

It also said it intends to dispose of its remaining $5.8 portfolio of mostly residential mortgage-backed securities either through principal repayments “or through a strategic alternative, including actively pursuing the sale of the common stock of its REIT subsidiary.” That move could result in another $200 million charge.

About $5.3 billion in financing remains for the remaining RMBS portfolio, according to the press release.

“Due to the unprecedented disruption in the residential mortgage and global commercial paper markets, the company has initiated discussions with the investors in its asset-backed secured liquidity note facilities regarding various alternatives to resolve potential funding disruptions resulting from the current market environment.,” the announcement said. “No assurance can be made that any of the strategies being evaluated by the company will be successfully executed.”

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