The Federal Deposit Insurance Corp.'s upcoming safe harbor rules could add to real estate investment trusts' relative advantage in the securitized nonagency residential mortgage space.
The new safe harbor, which imposes new rules on FDIC-regulated banks seeking a securitization safe harbor-but also remove a barrier to obtaining the old safe harbor due to recent accounting changes-may add to the advantages REITs have been seen as having over banks, Chimera Investment Corp. president and CEO Matthew Lambiase indicated in his answer to a question at the National Association of Real Estate Investment Trusts' annual convention in New York.
Banks compete with REIT investors like Chimera for relatively better nonagency mortgage investments such as jumbo loans, and because REITs in this area don't face the same regulatory constraints as banks, they have an advantage.
When asked whether the safe harbor might add to that advantage, Lambiase indicated that it could and he is hoping it will.
The fact the banks have capital constraints and other rules to follow that REITs do not "plays very well for mortgage REITs," he said.
Chimera, originally formed to securitized nonagency product in 2007 in response to what Lambiase said was the beginnings of improved loan underwriting quality at that time, would eventually like to return to the original goal should conditions reach the point where the nonagency securization market could make a comeback.
But Lambiase said, "I am not banking on any kind of recovery" and indicated the one effort toward new securitization seen in the market recently was not easily done.
The REIT that did that deal "shucked a lot of oysters to get those pearls," he said, noting that today's tough rating agency standards also add to the many challenges standing in the way of a new non-agency RMBS issuance.
