In the works at Annaly Capital Management is a non-qualified mortgage (non-QM) securitization worth $405.2 million. For 2023, this is the firm’s first non-agency mortgage-backed security (MBS).

In terms of mortgage real estate investment trusts (REIT), Annaly Capital Management, Inc. is one of the largest. Founded in Maryland, the company’s headquarter is in New York City. Short-term repurchase agreements are the main means by which the company borrows money and invests the proceeds in asset-backed securities.

Mortgages that do not meet the traditional conforming agency guidelines are known as non-qualified mortgages (Non-QMs). The non-QM securitization market surpassed $30 billion in issuance in 2021, the biggest year on record. Increasing mortgage rates may result in a lower figure for 2022. In total, $41.5 billion in non-QM issuance is outstanding.

Backed by a pool of non-qualified mortgages with a weighted average gross coupon of 6.92% (only a tad bit higher than the current rate on less-risky traditional 30-year FRMs), a $405.2 million deal is prepared by the real estate investment trust. This initiative is part of its ongoing effort of pushing into non-agency mortgage lending.

New mortgage-backed securities were sourced from multiple mortgage lenders and have been seasoned for 5.4 months on average.  A $397.5 million expanded-credit MBS was issued by Annaly in September prior to this transaction

In 2021, Annaly acquired non-QM loan portfolios through its correspondent channel, including investment property, second homes, and foreclosures.

Mike Fania, head of residential credit at Annaly, explained that most of the company’s purchases are in the non-QM market. About 75% of your sales are made up of AAA, which has non-QM spreads of 85 to swaps. To date, that translates to 60 to swaps.