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September 28, 2018  

Goldman Readying Jumbo-Mortgage Deals

Goldman Sachs is back in the picture as an issuer of jumbo-mortgage bonds, with a new whole-loan trader on board.

After an absence of several years, the bank is aiming for the first quarter of 2019 to float such an offering. Routine transactions would follow.

Word of the effort surfaced with the Sept. 4 arrival of Joshua Banschick, who had been working at J.P. Morgan since 2008 — most recently as an executive director on the bank’s jumbo-mortgage trading desk. He appears to have already bid on several large loan pools as a Goldman employee, working alongside managing director Michael Leister. Both traders report to Mahesh Saireddy, who is in charge of Goldman’s mortgage-trading efforts in the U.S.

Goldman was a routine issuer of jumbo-mortgage bonds before the credit crisis, having completed $105.5 billion of such offerings from 1999 to 2008. Like many of its peers, the bank then pulled backed from the market — only to re-launch a conduit a few years later.

That effort produced a single offering of $282.8 million in November 2014, with Goldman subsequently retreating as funding costs tipped in favor of whole-loan sales.

More recently, other former issuers have re-emerged amid an improvement in the economics of using securitization to finance jumbo-loan portfolios. TIAA Bank has carried out two transactions totaling $695.4 million this year, reviving a program that predecessor EverBank paused in 2013. And PennyMac, which completed a lone $550.5 million offering in 2013, has been looking at early 2019 to jump back into the market.

Several first-time issuers of jumbo-mortgage bonds also are in the pipeline, including AmeriHome Mortgage (see article on Page 3).

Along with a friendlier funding landscape, the efforts reflect preparations for an influx of new loans. With the Trump Administration expected to scale back the activities of Fannie Mae and Freddie Mac, in part by reducing agency loan limits, the belief is that a swath of borrowers soon will become available to private-label lenders — which in turn will need additional capital-raising mechanisms to accommodate the business.

The same factors likely contributed to a move in which Goldman already has re-established itself as an underwriter of private-label mortgage bonds after sharply curtailing those activities in 2007. On Sept. 20, the bank appeared alongside J.P. Morgan as bookrunner for a $426.1 million reperforming-loan deal from CarVal Investors. It also shared bookrunning duties with Deutsche Bank and Nomura on a $368.1 million subprime-mortgage transaction from Angel Oak on Aug. 16.

It’s unclear if Goldman’s current mortgage-trading efforts are linked to its previous activities as a conduit operator. Separately from those initiatives, the bank completed a series of post-crisis re-Remic transactions that ceased in September 2016.

Issuers have completed 42 securitizations of newly originated jumbo mortgages totaling $17.8 billion this year, surpassing the full-year 2017 count of 32 deals for $14.5 billion, according to Asset-Backed Alert’s ABS Database.