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Whole Loans, MBS and MSRs Traded

Mortgage News

Trading of whole loans and mortgage-backed securities has been increasing, especially with the expanded market share of Fannie Mae, Freddie Mac and the Federal Housing Administration. Also fueling activity are private financial firms hungry to improve their bottom lines. Distressed assets are a hot commodity.

Fannie, through its first real-estate-owned pilot transactions program, has sold a total of 1,763 of its REO assets through three separate sales. Pacifica Companies LLC purchased 699 properties in Florida, The Cogsville Group LLC acquired 94 properties in Chicago, and Colony Capital LLC picked up 970 properties in California, Arizona and Nevada, according to the Federal Housing Finance Agency.

REO properties in Atlanta are being evaluated for a possible future sale, FHFA said.

The REO transaction pilot program was launched by the regulator in late February. The program was developed in conjunction with the Department of the Treasury, Department of Housing and Urban Development, Federal Deposit Insurance Corp., the Federal Reserve System, Fannie and Freddie Mac.

Herndon, Va.-based RER Equities Inc. has acquired 51 performing, sub-performing and non-performing residential and commercial mortgages secured by properties in the Miami-Dade area of Florida. The loans, with outstanding balances totaling $33,413,513, were purchased from Coral Gables, Fla.-based EuroBank.

Ellington Financial LLC, is purchasing prime jumbo, Alt-A and subprime residential MBS and subprime residential whole loans. Financing came from the $76.6 million it raised from its September sale of 3.5 million common shares of stock through a public offering plus an additional $11.2 million from the sale of 525,000 more shares, purchased under an option fully exercised by the offering’s underwriters, according to the Old Greenwich, Conn.-based company.

The 43,000-member, federally chartered Self-Help Federal Credit Union of Oakland, Calif., has purchased $141 million in mortgage loans from the FDIC, which had assumed the loans from the failed Second Federal Savings & Loan Association that was closed in July by the Comptroller of the Currency. Second Federal’s depositors and roughly $14 million in assets, mostly cash, was accepted by Hinsdale Bank & Trust Co.

Self-Help FCU paid $59 million for the loans and assumed the loans as part of a partnership with The Resurrection Project, a community development organization in Chicago that had feared another purchaser might foreclose on the loans.

Redwood Trust Inc., in an offering completed on Oct. 17, sold $297 million of securities backed by non-government agency mortgages. The transaction continues its sales activity that had totaled $62 million during the third quarter — a quarter during which it also closed a $313 million securitization of 372 prime jumbo loans. And in late October the Mill Valley, Calif.-based real estate investment trust, which specializes in jumbo loans, closed a $320 million securitization.

On Oct. 25, Springleaf Finance Corp. sold $787 million in RMBS to investors through Fourteenth Street Funding, a special purpose vehicle wholly owned by Springleaf. The Evansville, Ind.-based firm, which itself is primarily owned by Fortress Investment Group LLC, has faced large financial losses and debt. The securities included fixed- and adjustable-rate first-lien mortgages secured by one- to four-family residences.

It was the third MBS sale Springleaf has done so far this year. The two earlier sales totaled some $1.4 billion.

Late last month, Freddie announced a new offering of Structured Pass-Through Certificates, which are multifamily mortgage-backed securities, in its 16th K Certificate offering this year. The secondary lender expects to offer approximately $1.2 billion in K Certificates by mid-December.

The K-022 Certificates, backed by 81 recently-originated multifamily mortgages and guaranteed by Freddie, will be offered to the market by a syndicate of dealers led by Barclays Capital Inc. and Wells Fargo Securities LLC as co-lead managers and joint bookrunners. J.P. Morgan Securities LLC, Jefferies & Company, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Securities LLC will serve as co-managers.

The FDIC closed its fourth Small Investor Program sale on Oct. 18. The sale involved a competitive bidding process for a 25 percent equity interest in a limited liability company that was formed by the FDIC in its receivership capacity to hold certain assets of the failed Tennessee Commerce Bank located in Franklin, Tenn., which was closed down by the Tennessee Department of Financial Institutions on Jan. 27.

The assets represent a pool of 93 performing and non-performing commercial real estate loans, commercial acquisition, development and construction loans and credit facilities, and performing and non-performing residential acquisition, development and construction loans and credit facilities. The aggregate unpaid principal balance of the pool is approximately $166.2 million with the highest concentration of collateral in Tennessee.

The winning bidder of the 25 percent equity stake was Tennessee Loan Acquisition Venture LPs, which is owned by a minority-owned business and entities controlled by Oaktree Capital Management. The participating FDIC receivership will hold the remaining 75 percent equity interest in the LLC until all equity is returned.

Tennessee Loan Acquisition paid a total of approximately $24 million, net of working capital, in cash for its stake in the LLC. Tennessee Loan Acquisition will provide for the management, servicing and ultimate disposition of the LLC’s assets.

In addition to whole-loan sales and MBS trading, mortgage servicing rights are trading hands.

New York-based Mortgage Industry Advisory Corporation completed on Sept. 30 what it described as one of the largest bulk Fannie Mae mortgage servicing portfolio sales of the year — a $2.4 billion portfolio that was sold without bifurcation of seller and servicer representations and warranties.

“New buyers are beginning to trickle into the market to purchase bulk Fannie Mae MSRs on a non-bifurcated basis,” said Dan Thomas, managing director of MIAC’s client solutions group, “allowing sellers greater opportunities to sell some of their MSR holdings and lend the proceeds to new borrowers.”

MIAC has several other MSR deals coming to market before yearend, he reported. The combined unpaid principal balance of the portfolio offerings will be approximately $1.5 billion, with most of the collateral being Fannie Mae or Ginnie Mae loans originated over the last eight months.

Two bulk sales of Fannie Mae MSR packages were completed by MountainView Servicing Group on Aug. 31. The combined balances of the packages was approximately $750 million.

That transaction followed the sale by Denver-based MountainView of three similar servicing deals on July 31 with a combined unpaid principal balance of $487 million.

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