Two Harbors Liquidates Its Credit Portfolio, Focuses Efforts On Agency MBS And Servicing
May 18, 2020
Residential mortgage REIT Two Harbors Investment Corp. has announced that it has sold its credit portfolio, retaining its government-guaranteed assets, according to The Motley Fool.
"Margin calls were the most immediate issue facing mortgage REITs, since the typical REIT uses its own assets as collateral for loans. As the value of the collateral falls, the REIT must come up with additional cash in accordance with the repurchase agreement. If the REIT doesn't have the cash, then it must sell assets," the report said.
The report stated that Two Harbors began the quarter with $3.6 billion in non-government-guaranteed assets. However, that diminished to almost nothing by the end of the quarter. In addition, Two Harbors agency mortgage-backed securities decreased from $27.8 billion to $17.8 billion. The company will also be facing challenges ahead in terms of servicing.
"When a borrower fails to make a payment, the servicer is required to reach into its own pocket and pay the missing payment to the ultimate owner of the mortgage. When defaults are low, this requirement can be handled easily, but if 15% of the mortgage book stops paying, it can ruin a non-bank servicer," the story said. "On the conference call, Two Harbors mentioned it is in discussions for a credit line to fund these payments, and the company has the liquidity to survive even higher delinquency amounts."
Click here to read more about the moves by Two Harbors Investment Corp.
Subscribe to the nmp Daily
FMJ Job Listings
- General Manager - Humanity Trading LLC - New York City, NY
- Real Estate Operations Administrator - SF Fire Credit Union - San Francisco, CA
- Mortgage Loan Originator (204th & Maple) - FNBO - Elkhorn,
- Universal Banker (Overland Park, KS - College/Mn) - FNBO - Overland park,
- Director, Account Resolution - First Entertainment Credit Union - Hollywood, CA
- Retail Personal Banker Associate II (Southeast Cobb) Smyrna, GA - Fifth Third Bank - Smyrna, GA