IndyMac Bank last week sold $590 million in bonds backed by prime jumbo loans, the company said Monday — the first bonds the lender has traded since July 19, when “fear-induced illiquidity” froze the market.
In a statement posted on the official company blog, IndyMac communications director Grove Nichols said the bonds traded Friday sold at prices below “historical ranges” but at smaller discounts than “fire sale” trades conducted by other lenders in recent weeks.
IndyMac traded $240 million of AAA bonds backed by prime jumbo fixed-rate mortgage loans and $350 million of AAA bonds backed by prime jumbo adjustable-rate mortgage (ARM) loans
“We are encouraged by these sales as they represent the first small sign that the ice is beginning to melt, and some modest liquidity is beginning to return to the private-label mortgage market,” the statement said. “It appears as though, given the current historically wide spreads, significant tightening of underwriting standards by lenders, and the updated rating agency models requiring stronger subordination levels, investors are beginning to recognize that private mortgage-backed bonds may offer strong risk-adjusted returns.”
The lack of demand for mortgage-backed securities (MBS) had forced IndyMac to stop offering jumbo loans. On Wednesday, the company announced it had resumed originating prime, single-family residential, full-documentation jumbo loans.
The loans, including 5/1 ARMs, 7/1 ARMs, and 15- and 30-year fixed-rate products, are available only to borrowers providing full documentation.
Borrowers with FICO scores of 680 and above and a 25 percent down payment are eligible for a loan of up to $2 million, or up to $1 million with 20 percent equity. A borrower with a FICO score of 700 or better, a 15 percent down payment and mortgage insurance is eligible for a loan of up to $750,000.
In its last quarterly earnings report, IndyMac said it laid off 400 employees as a cost-cutting measure and had been forced to repurchase $443 million in loans in the first six months of the year.