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Credit agencies disagree on Redwood Trust securities

Credit rating agencies disagreed over the ratings for the second issue of securities backed by jumbo home loans that Redwood Trust Inc. of Mill Valley, Calif., has brought to market in 10 months, according to a report today in the Wall Street Journal.

Redwood brought securities to market in April 2010 and again this week. This week’s deal, expect to close March 1, is being closely watched as a sign that securitization, largely frozen since 2008, is starting to thaw.

Each Redwood offering was valued between $200 million and $300 million. Each time, credit rating agencies had differing opinions on the quality of the portfolios. This contrasts to the period before the financial crisis, when credit rating agencies routinely gave high marks to mortgage-backed securities.

The market for non-guaranteed mortgage-backed securities has been uncertain since the financial crisis of 2007-08, which erupted over questions about the quality of mortgage-backed securities being used as collateral for repo loans. The limited supply of top-rated securities has been a drag on credit since the crisis.

Redwood Trust is a publicly traded company that invests in, finances, and manages residential and commercial real estate loans and securities not guaranteed by Uncle Sam through agencies like Fannie Mae and Freddie Mac. Securities with a high rating are more valuable as repo collateral and Redwood can sell them for more money.

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