--Amelia Granger
Securitization pioneer Lewis Ranieri’s new Selene Residential Mortgage Opportunity Fund, which is slated to buy about $1 billion in non-performing mortgages, will consider a securitization exit for loans on its balance sheet. While Ramieri and officials at the fund had no comment, an official familiar with the fund told TS that, “Down the road, Selene would consider the possibility.”
Even though Ranieri, “the godfather” of mortgage finance, is credited with creating the first RMBS transactions at Salomon Brothers in the 1980s, the move into issuing new residential mortgage-backed securities through the fund could be challenging.
“There are two issues – the issue of desirability and the issue of the rating agencies,” said one trader, asked about the securitization option. The fund probably would find the process more difficult [than more traditional issuers] he said, noting the novelty of the fund’s modified, re-performing collateral. “They’re going to be esoteric securities, and they would need to have some meaningful yield.”
He also pointed out that the Selene product would face the same hurdles as all other new RMBS issuance, with respect to rating agencies. Only one new issue public RMBS deal, Redwood’s Sequoia Trust, has made it to market this year (TS, 4/30). “But if [Selene bonds] are trading with a 6%, 7% or 10% yield, people are going to love to do that,” the trader said.
Selene reportedly holds $1 billion in “re-performing mortgages,” loans it buys from lenders. It modifies the assets, mainly through principal reductions, to get borrowers back on track and making regular payments.