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March 01, 2019  

Goldman Maps Non-QM Issuance Program

Goldman Sachs is positioning itself to securitize home loans that don’t meet the Consumer Financial Protection Bureau’s “qualified-mortgage” standards.

The deals would be backed by accounts Goldman intends to purchase from a host of suppliers. Executives from the bank discussed the initiative with originators and bond buyers at the Structured Finance Industry Group’s “SFIG Vegas 2019” conference on Feb. 24-27 in Las Vegas.

While one industry participant said Goldman has yet to decide whether to move ahead with the effort, others said the bank has communicated a vision of working with lenders that would originate large volumes of loans to its specifications.

“From how they pitched it, this is going to be a big program, and they want to set up specific channels from sellers that can meet their needs,” one source said.

If it moves forward, Goldman would be the first big Wall Street bank to securitize non-qualified mortgages, though a number of banks offer warehouse lines to issuers including hedge fund operators and REITs. Reliant Bank of Brentwood, Tenn., is developing a program to buy non-qualified loans, then resell them for inclusion in securitization pools (see article on Page 2).

Issuance of bonds backed by non-qualified home loans is expected to increase sharply this year, with S&P forecasting full-year volume of more than $20 billion — more than twice the amount sold in 2018.

Goldman’s initiative would parallel a separate effort by the bank to resume securitizing qualified jumbo mortgages. Goldman last year hired whole-loan trader Joshua Banschick from J.P. Morgan with an eye toward stockpiling assets for those deals. An initial bond offering could hit the market in the next few weeks.

Prior to the 2007-2008 market crash, Goldman was among the most prolific issuers of jumbo-mortgage paper, having sold $105.5 billion of securities from 1999 to 2008, according to Asset-Backed Alert’s ABS Database. After the market began to recover, Goldman tried to resurrect its conduit program, but managed to issue just one deal in 2014 totaling $282.8 million.