Ranieri pulls plug on nonagency MBS offering

There's more evidence Fannie (FNMA +6.8%) and Freddie (FMCC +7.6%) aren't going anywhere anytime soon as Shellpoint Partners - led by mortgage kingpin Lew Ranieri - pulls a planned MBS offering for the 2nd time this month, citing soft demand. The company had restructured the bond issue - backed by jumbo residential mortgages - by removing some of the riskier loans in exchange for better agency ratings, but it still wasn't able to get the prices it wanted.

Issuance of nonagency paper had flown earlier this year, but has ground to a halt since interest rates began rising this spring. Additionally, Frannie has begun offering a new security more tied to credit than rates, thus sapping some demand for nonagency bonds.

Trying to break into the nonagency issuance market, PennyMac Mortgage Investment Trust (PMT +0.2%) last month had to cut prices at least twice on its debut offering. Redwood Trust (RWT -0.6%) - which pretty much had the nonagency field to itself not long ago - has struggled mightily since the spring.

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Comments (8)
  • DeepValueLover
    , contributor
    Comments (11175) | Send Message
    As I've said...Freddie and Fannie are SuperSafe™.


    Congress couldn't agree on a thermostat setting in the Chambers much less a way to replace F&F.


    Expect another double by 2015.
    23 Oct 2013, 10:36 AM Reply Like
  • Jonathan Bluhm
    , contributor
    Comments (403) | Send Message


    What do you mean by expect another double by 2015? You think that the share price of FNMA and FMCC will only be around $3.50 next year?


    I think that every positive piece of news about either of these companies, including earnings reports getting better and better will drive the share price higher than that.


    Do you remember what happened earlier this year when FNMA reported its first profit in a while? The share prices went up some 1800% in a matter of weeks...


    Of course, I think the average investor and even the speculator in these two companies knows by now that the common shares are essentially worthless currently. And over 90% of profits go to the govt? So maybe you think that fact will keep share price down?
    23 Oct 2013, 10:47 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11175) | Send Message
    I was being conservative.


    It will be hard to wrestle congressmen away from the F&F money geyser but there is litigation pending to do just that.


    We will have to stay tuned...
    23 Oct 2013, 10:50 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2862) | Send Message
    To me, thats the biggest risk. Congress is going to be loath to give up their new slush fund.
    23 Oct 2013, 11:42 AM Reply Like
  • RickyC
    , contributor
    Comments (112) | Send Message
    FYI, the "Qualified Mortgage" rule in the Dodd Frank Financial Reform Act takes effect in January, 2014. That kicker will have a very negative impact on the non-agency residential mortgages.


    There was a private mortgage industry review done recently of 2013 residential originations that showed that 20% of the them did not fit the Q.M. requirement.


    Starting next year that Q.M. ruling becomes a bonanza for the trial attorney hotshots. The Dodd Frank Financial Reform Act highly favors litigation done offered by the trial attorney association. (Yep, you can guess that their lobby had their pen working hard on the drafting of that legislation.)


    BTW, Dodd Frank pertains to residential and not commercial loans.
    To learn more, get a copy of the law and scroll down to the part that reviews mortgages.


    (I am not an attorney and therefore cannot give legal advice.) However, I've followed the mortgage industry for over 30 years.
    23 Oct 2013, 11:13 AM Reply Like
  • kevindaly
    , contributor
    Comments (11) | Send Message
    Fannie fits all of the elements of a good investment. It is highly profitable. It has a dominant position in its market. There is an extremely high barrier to entry by competitors, as seen by the withdrawal of ShellPoint. It is highly skilled in its field of business. It is run very conservatively.
    The only issue is survival. If Congress chooses to eliminate Fannie there are several certain consequences. It will cost more for people to get a mortgage. Fewer people will qualify. Home prices will fall. ALL homeowners will be affected. They will be angry at Congress. So, if Congress is concerned about their own survival, then they will let Fannie and Freddie survive.
    23 Oct 2013, 01:22 PM Reply Like
  • ken71
    , contributor
    Comments (33) | Send Message
    I am strongly confident this will happen. Consituationally the right thing!Hedge funds are currently locking in big time not to mention probably congressmen who have some insights. 2014 will start seeing new heights for FNMA & FMCC prices - above USD5. Dont miss the boat!
    23 Oct 2013, 09:11 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2862) | Send Message
    They can let Fannie and Freddie survive without giving any of the profits to shareholders. Fannie and Freddie surviving doesnt mean for certain that the equity has any value.
    23 Oct 2013, 11:07 PM Reply Like
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