One of Wall Street’s biggest bundlers of mortgage bonds has moved into rentals, the Wall Street Journal reported. Redwood Trust Inc., which specializes in packaging jumbo home loans into securities, recently sold a $376 million bond backed by rent payments. The deal was its first since acquiring CoreVest American Finance LLC, a lender to landlords, in October. Redwood’s $490 million purchase of CoreVest—as well as a smaller deal in March for fix-and-flip lender 5 Arches—marks a concession to the rise of renters since last decade’s housing crash and the growing slice of the housing market being bought by landlords and flippers. Purchases by such investors accounted for more than 11 percent of U.S. home sales in 2018, their highest share on record, according to CoreLogic Inc. With its acquisitions, Redwood could originate more than $3 billion of loans to landlords and house flippers in 2020, said Matthew Howlett, an analyst with Nomura Instinet. Doing so wouldn’t only produce fees for bundling the bonds, but also more than $300 million of securities—the lowest-rated 10 percent segment of each deal—that produce high yields.
