Redwood Trust Inc. of Mill Valley, Calif., will likely come to market with a $300 million jumbo mortgage-backed security in the fourth quarter.
However, the publicly traded real estate investment trust said in its latest quarterly review, which was released late last month, that its ability to buy jumbo mortgages in the secondary market is "constrained by headwinds," in particular what it calls the government's "outsized role" (via Fannie Mae and Freddie Mac) in the mortgage market.
In the report Redwood complains that the government-sponsored enterprises are snatching up "conforming jumbos" (mortgages that are $417,000 to $725,750 in size) when instead these loans should be going to private-sector buyers.
"For context, in 2009, there were $192 billion of residential mortgage originations over the $417,000 standard conforming limit, $100 billion (52%) of which went primarily to Fannie Mae and Freddie Mac instead of the private sector," the company said.
In the spring Redwood came to market with a $238 million jumbo MBS, the first private-label deal in 18 months. To date, Redwood is the only company to have pulled off a deal.