Mortgage lenders are easing off new securitizations as Treasury yields jump and borrowing costs climb, stoking worries about how well borrowers can keep up with payments. The latest example: Figure Technology Solutions Inc. postponed a $346 million residential mortgage-backed security slated for Thursday after demand fell short, said people with knowledge of the situation.
"Figure maintains a strong loan marketplace across both securitizations and whole loan sales," a company spokesperson said by email. "In this instance, the whole loan execution was stronger."
Figure, based in New York, offers revolving credit lines secured by homes. The postponed transaction was backed by 4,101 mortgages with maturities of up to 30 years, one person said. They noted the senior-most piece was a $256.3 million tranche carrying an AAA rating, pitched at roughly 1.55 percentage points above the benchmark. Jefferies Financial Group Inc., which was leading the sale, did not immediately respond to a request for comment.
Figure's delay followed two other moves. Freddie Mac postponed more than $440 million of securities tied to loans on apartment properties, and Bridge Investment Group put a $1.19 billion commercial real estate CLO on hold, a vehicle used to fund riskier deals. With Treasury yields surging and investors demanding higher compensation for assuming mortgage risk, some issuers are stepping back or opting for cheaper funding routes.
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In plain English: higher Treasury yields and rising return demands are shifting the math for new mortgage and commercial real estate bond issues. That is leading some sellers to wait, reduce reliance on securitizations, or use alternatives like whole loan sales. For investors in securitized credit, expect more headlines about delayed or reworked deals as required returns reset.
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