- How aggressive have banks been with loan price competition as they seek to add mortgages to their books, asks Redwood Trust (RWT +0.8%) management in its must-read Redwood Review. During Q3, some were offering 30-year fixed-rate mortgages at more than 25 basis points less than conforming rates, when typically these are 25 bps higher.
- "We have never witnessed jumbo loan pricing quite like this," says Redwood, and it's particularly curious why banks would want long-duration assets just at the time when rates look to be headed higher. The answer is an abundance of liquidity and a desire for loan and interest income growth trumping the potential consequences down the road. "It is difficult to estimate how long this condition might persist."
- Last night, Redwood reported taxable EPS of $0.24 and book value slipping $0.04 to $14.65 in Q3 after payment of a $0.28 dividend.
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