Capital Assets Weekly Comments

Tom McLemore
Taking Advantage of Market Opportunities

The onset of COVID-19 and shelter in place has completely disrupted the non agency Private Label Securitization (“PLS)” market. Billions of dollars of new production loans are sitting on the balance sheets of non-bank aggregators, conduits, and securitizations who are anxiously looking for a home for their loans. Loan types include super-prime full doc jumbos, non-QM mortgages, HELOCs, and auto loans, all originated for a PLS takeout that no longer exists. In addition, FHLMC and FNMA have temporarily suspended agency-grade bulk sales. The vast majority of FHN Financial Capital Assets Corp. (Capital Assets) depository customers had no part in causing the PLS market disruption, but most are well positioned to take advantage of it. Loans that were trading at hefty premiums just a few weeks ago are now pricing at discounts to modest premiums. The window of opportunity is open to acquire A grade credit loans at yield spreads very wide to MBS. If resources are an issue, Capital Assets can help by managing many of the typical buyer responsibilities.

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