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March 08, 2019  

AIG Stepping Up, Diversifying MBS Output

AIG is planning an expansion of its mortgage-bond program, potentially positioning itself as a leading issuer in the sector.

The insurer, which already sells bonds backed by fixed-rate jumbo loans, would start by offering securities backed by adjustable-rate jumbo accounts that meet the Consumer Financial Protection Bureau’s “qualified-mortgage” standards. The first of those deals could come before midyear.

AIG also is looking at the second half of this year to issue bonds backed by non-qualified mortgages.

The receivables would come from a network encompassing an estimated 80 correspondent lenders across the U.S. — mostly from a core group of about 20 that write loans to AIG’s specifications for securitization. The qualified adjustable-rate credits would require full documentation, borrower credit scores of at least 730 and loan-to-value ratios of 70%. The parameters for the non-qualified loans remain under wraps.

“They are focused on buying jumbo ARMs right now, but have a laundry list of investors that want to do non-QM, so they’ll get there this year,” one source said.

AIG’s mortgage business is led by William Moss.

AIG began selling bonds backed by qualified fixed-rate jumbo loans in 2017 via a Credit Suisse trust, and in 2018 started using its own PSMC Trust. It finished last year in eighth place among issuers of securities underpinned by new prime-quality or subprime mortgages in the U.S., with four deals totaling $1.5 billion, according to Asset-Backed Alert’s ABS Database.

Should that activity remain stable amid a similar output of deals backed by adjustable-rate qualified loans and non-qualified accounts, AIG could become a top-three issuer alongside J.P. Morgan and Redwood Trust.

AIG has issued a mix of securitizations over the years, mostly in the form of collateralized debt obligations completed before the 2007-2008 market crash. In addition to its mortgage securitizations, the company’s activity today encompasses a collateralized loan obligation business it gained in its 2018 takeover of Covenant Credit.

The most recent offering to take place through that program was a $504.7 million transaction that priced Feb. 22 with Wells Fargo running the books.