Magazine article American Banker

Mortgage Securities Issuance Rises 75% in 1st Half

Magazine article American Banker

Mortgage Securities Issuance Rises 75% in 1st Half

Article excerpt

It's official: Mortgage securities are back in vogue.

With investors clamoring for mortgage assets, Wall Street firms and banks issued $82 billion of mortgage securities in the first half of 1997, up 75% from a year earlier, according to a report from Securities Data Co., Newark, N.J. It was the highest first-half volume in three years.

A search for yield drove many investors into the mortgage market from the corporate bond and Treasury markets, industry observers said. Mortgage securities buyers also showed renewed interest in sophisticated structures, after shying away from these products for the past couple of years.

"It's a good time for the market," said Ryan Johanson, a vice president at Norstar Investment Management, a private investment firm in Greenwich, Conn.

Mortgage securities represent interests in pools of mortgages. The most common type is the pass-through, so-called because payments are passed directly to investors on a monthly basis.

More sophisticated, multiclass structures like Real Estate Mortgage Investment Conduits, or Remics, were also snapped up in the first half of 1997. Investment banks create these products by packaging together pass throughs and whole loans. The resulting security is sliced into various pieces, or tranches, that carry different interest rates and maturities.

The market for Remics tanked in 1994 and 1995, when sharp rises in interest rates caught investors off-guard. Now, that market is rebounding, thanks to stable rates, simpler structures, and investors' hunt for yield, industry observers said. …

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