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January 26, 2018  

Carrington Poised to Join Non-QM Pipeline

Carrington Mortgage is favoring securitization to fund a new program under which it is writing home loans that fall outside the Consumer Financial Protection Bureau’s “qualified-mortgage” guidelines.

While the timing of an initial bond offering will depend on origination volume, sources expect the effort to take shape quickly — with a deal coming during the second half of this year. The transaction likely would total a couple hundred million dollars, and would be followed by larger and more frequent issues.

Indications are that Carrington views itself as particularly qualified to offer bonds backed by non-qualified mortgages. That’s partly because the Anaheim, Calif., lender already has a long history in securitization, having completed 21 securitizations of home-equity loans, subprime mortgages and net-interest margin cashflows totaling $13.8 billion from 2004 to 2007.

After riding out the credit crisis, Carrington returned to the private-label market, this time as an issuer of nonperforming mortgages. The company since has carried out several billion dollars of those transactions, all privately placed and unrated, including two deals totaling $450 million that Wells Fargo led on its behalf in 2017.

Carrington also completed a single servicer-advance securitization of $60 million in 2014, also via Wells.

Carrington president Raymond Brousseau is overseeing the new lending initiative, with chief investment officer Andrew Taffet handling development of the securitization program.

Carrington launched its non-qualified lending effort on Jan. 12, dubbing the initiative its “non-agency loan program.” It is offering mortgages of up to $1.5 million for primary residences, second homes and investment properties. Borrower credit scores can go as low as 500, with financing available for individuals with recent credit events. The weakest accounts are subject to a 75% cap on loan-to-value ratios, with stronger ones eligible for an 85% maximum with no mortgage insurance.

The loans carry 30-year terms, with fixed interest rates or floating rates that change annually after fixed introductory periods of five or seven years.

Carrington also writes agency, FHA, VA and Ginnie Mae loans. The Ginnie program started in 2011 with a focus on borrowers with credit scores below 650, giving the company additional experience that is seen as likely to aid its non-qualified lending activities.