Private-Label RMBS Deal Sees Strong Investor Interest

The private-label mortgage debt drought has come to an end. ""Redwood Trust Inc."":http://www.redwoodtrust.com priced the industry’s first non-agency, non-government residential mortgage-backed securities (RMBS) in two years on Friday. Bidding by investors for the $222.4 billion pool of home loans was so strong that it sold at lower yields than Redwood initially offered.

Pricing of the AAA-rated securities was pushed down to an annual interest rate of 3.75 percent as a result of the

[IMAGE] [COLUMN_BREAK]

strong investor interest. Redwood was originally offering 4.00 percent. Redwood says the deal is expected to close on April 28.

As ""DSNews.com previously reported"":http://dsnews.comarticles/redwood-trust-readies-first-private-label-rmbs-deal-in-two-years-2010-04-22, the new-issue bond consists of 225 first-lien prime jumbo mortgage loans originated by ""Citigroup"":http://www.citigroup.com.

Thomas Atteberry of ""First Pacific Advisors"":http://www.fpafunds.com in Los Angeles, who bought some of the debt, told _Bloomberg News_, that right now, “the availability of mortgage product is next to nothing,” and that stoked demand from investors.

Atteberry also told the news agency that the underlying loans of the new offering are safer than ones backing such bonds before housing collapsed. He said the higher quality of the loans, especially the fact that the mortgages represent only 60 percent of the value of the properties, makes “me feel comfortable I’m covered if something goes awry,” _Bloomberg_ reported.

With secondary market investors’ appetite for the Redwood-Citi mortgage bond so intense, market observers are expecting similar high-quality deals to hit the market in the coming months.