Excess Spread — Hard pass, yard sale, fix the plumbing

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Excess Spread — Hard pass, yard sale, fix the plumbing

Owen Sanderson's avatar
  1. Owen Sanderson
9 min read

Hard pass?

Much specialist lender M&A and financing activity consists of splitting or recombining origination and holding loans.

The capital that likes to fund essentially a stream of product fees might be different from the capital that likes to hold large volumes of mortgages, and the skill sets aren’t necessarily the same.

Putting on a good trade in buying mortgage portfolios consists in being correct about future states of the world, with enough leverage to make it interesting if you are, and enough downside protection so it won’t hurt much if you aren’t. Writing a lot of mortgages, though, has to do with broker relationships, advertising, underwriting teams, technology, and operational processes.

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