“Good to see some proof of a retained percentage. In reading about WMI’s securitizaton process from an old SEC report (as I recall), they said it was their practice to retain a percentage.
Good thing, because, according to the article below, before the crisis there was no minimum ownership requirement. Hence some of the the helter skelter behind the crisis.
det
Excerpt: “Before the crisis, there was no minimum ownership, resulting in mortgage firms simply flipping all kinds of dross at Goldman or Merrill or Bear Stearns. “This is not an originate-to-sell model; it’s an originate-to-own model,” says Fierman of Angel Oak. His firm, which buys nonprime loans from other brokers as well as originating its own, has been the most active of MBS issuers, completing four deals since 2015 worth a total of $630m. He says that Angel Oak has gone well beyond the basic 5 per cent threshold, owning as much as 10 per cent of its MBS deals at various points. “Trust has to be built with investors,” he says. “They’re watching us closely.” ----------------------------------- https://webcache.googleusercontent.com/search?q=cache:JCE3tDYd0ikJ:https://www.ft.com/content/3c245dee-8d0f-11e7-a352-e46f43c5825d+&cd=2&hl=en&ct=clnk&gl=us
Yes, I have seen Observer's post admitting to dumping all for DIMEQs. Perhaps the person who has a copy of that post will share it, so everyone will understand the deep animus that still fuels his posts--even ten long years later. It's downright pathological.
det _____________________________
First of all...today is the day before we hear anything regarding the WMILT QSR, which should have been released prior to August 1, 2018...so I wish GLTA for positive news regarding distributions to all stakeholders.
Now to the crux of this post!
IMO...Angel Oak Funds which had an inception date of June 27, 2011 employed former WMI employees (Friedlander and Negandhi) who were intimately involved in WMI Securitizations:
Brad A. Friedlander is a Managing Partner of the Adviser, and he is the Lead Portfolio Manager of the Fund. Mr. Friedlander has 12 years of capital markets and asset management experience across an array of fixed income products. Prior to the Adviser,
Mr. Friedlander spent 5 years as a portfolio manager with Washington Mutual in Seattle, Washington, where he managed over $8 billion across RMBS, ABS, US government and Agency portfolios. He also served as the chief strategist behind the institution’s $25 billion investment portfolio. Mr. Friedlander’s previous experience includes 4 years on the trading desk of J.P. Morgan in New York. Mr. Friedlander received a Bachelor’s degree in Economics from the University of Rochester. Ashish Negandhi is a Managing Director of the Adviser and Portfolio Manager of the Fund. Mr. Negandhi has 9 years’ portfolio management experience in fixed income products. Prior to the Adviser, Mr. Negandhi spent 2 years building and managing the investment grade corporate bond and CLO fixed income portfolio of $1 billion to $2 billion at Washington Mutual in Seattle, Washington. As portfolio manager, he was involved with macro trading strategies, performance analysis against market benchmarks and monitoring credit default and interest rate risk for the portfolio. Mr. Negandhi also worked as a Program Manager at Amazon in Seattle, where he led the Internal Fraud Prevention and Detection program for Amazon’s payment and financial systems. Mr. Negandhi received a MBA from University of Washington and Bachelor’s degree in Computer Science from Georgia College. The Fund’s SAI provides additional information about the Fund’s portfolio managers, including their compensation structure, other accounts managed, and ownership of shares of the Fund.”
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Per IHub Post#531081:
“Articles published in 2009 & 2013 cites Friedlander and Prabhu (former WMI employees) leaving WMI before seizure.
“Two WaMu Execs to Chase MBS May 25, 2009 Jacob Gaffney
Former Washington Mutual executives Sreeni Prabhu and Brad Friedlander partnered with SouthStar Funding founding partner, Michael Fierman, to start Angel Oak Capital Partners. Angel Oak is now focusing on distressed mortgage-backed securities (MBS), currently manages $30m in assets and is looking for more. So far, the fund's strategy is focused on acquiring pools of MBS that are trading at distressed prices despite prime performance. "We underwrite to buy and hold but will look to opportunistically sell when market liquidity returns," explains Prabhu. "The key difference with bigger firms who have the same strategy as us, we distribute monthly cash flows generated from these bonds back to investors on a monthly basis," he adds. Angel Oak is based in Atlanta, as was SouthStar, the wholesale and subprime mortgage lender that originated as much as $6.5bn of non agency mortgage products annually before it closed operations in 2007. Write to Jacob Gaffney.”
You can't fault investors for being a bit giddy about the housing recovery: Looking to cash in on rising demand and prices, they've been snapping up everything from rental properties to home-builder stocks for many months.
But while those investors see a bright future for the sector, Brad Friedlander is more interested in its past. Friedlander's $1.8 billion Angel Oak Multi-Strategy Income fund (ticker: ANGLX) has a large weighting in "nonagency" mortgage loans (those not backed by the government) that predate the housing bubble. Those loans, stigmatized since the bubble burst, have been available for cheap—and they've powered Friedlander's two-year-old fund to an auspicious start.
"Five years removed from the height of the housing crisis, there are still opportunities within the fixed-income realm," says Friedlander, 36, managing partner at Angel Oak Capital Partners, in Atlanta.
Since Angel Oak Multi-Strategy Income made its debut in June 2011, it has returned 24.1%, compared with 6.1% for the Barclays Aggregate Bond Index. Last year, the fund returned 22.7%, crushing its rivals in the multisector bond category by an average of 11 percentage points and putting it in the top percentile.
This year, however, is off to a rockier start. The fund is down 0.1% amid the broad market selloff, but that's still nearly two percentage points better than the index. In the meantime, it's delivering a yield of 4.42%.
Friedlander credits the fund's outperformance largely to its heavy weighting in nonagency mortgages that originated in the early- to mid-2000s. Nonagencies include everything from so-called jumbo loans—which exceed the roughly $400,000 to $730,000 mortgage the government will back—to lower-quality mortgages and subprime loans.
Nearly 70% of Angel Oak's assets are invested in this "private label paper," far more than any other mutual fund. Friedlander avoids subprime loans, which helped keep his fund from losing money along with its peers as those securities took a big hit in June. Instead, he focuses on jumbo loans that were issued before the financial crisis. What makes these mortgages of pre-bubble vintage so attractive, says Friedlander, is the continuing disconnect between their credit ratings and their inherent value.
Credit-rating agencies "absolutely obliterated the sector" after the housing crisis, stripping these securities of their investment-grade status. This led to forced selling by banks and other institutions, which are restricted from holding non-investment-grade bonds. Now nonagencies are available at 88 cents on the dollar, and Friedlander has taken advantage of the discount.
That's not his only focus, though. Collateralized loan obligations—bank loans backed by tangible assets—account for 15% of the fund. And Friedlander generally keeps 20% of the fund in very liquid assets, including government-agency debt.
Friedlander's knowledge of the mortgage market comes in part from having a front-row seat to the mortgage meltdown. He managed $8 billion of mortgage-backed securities for Washington Mutual before leaving in March 2008, six months before the bank's failure, and after he had become concerned about its future.
During the crisis, Friedlander saw investors flee from any and all mortgage-backed securities, but suspected there was more to the story. In May 2008, he and WaMu colleague Sreeni Prabhu joined mortgage-industry veteran Michael Fierman to found Angel Oak Capital Partners. "We saw a generational opportunity," Friedlander says.
The team first launched one hedge fund, which gained 57.8% between its July 2008 launch and its closure five months ago.Its best-performing hedge fund has scored a gain of 176.6% since its inception in early 2009. Between its mutual fund and hedge funds, Angel Oak manages $3 billion in total assets.
TRUE TO HIS OPPORTUNISTIC approach, Friedlander snapped up assets during the market's recent soft period. The fund had been stockpiling cash, which Friedlander unleashed on purchases that now account for 25% of its assets. Much of that is in high-quality fixed-rate and hybrid mortgage bonds as well as floating-rate bonds composed of certain types of adjustable-rate mortgages. The fund now has less than 1% in cash.
Meanwhile, the housing market is looking better than it has in years. Home prices in April were up 12.1% compared with a year earlier, according to the S&P/Case-Shiller home-price index. The increase was the largest in seven years. And new homes sold at an annual pace of 476,000 in May, according to the U.S. Census Bureau—the best reading since July 2008. As the housing recovery continues, many related securities will appreciate. What's more, 70% of the mortgages the fund holds carry adjustable rates. That means the fund is positioned to serve as a hedge against inflation and rising interest rates, says Terrence Demorest, senior portfolio manager at Westmount Asset Management, a $1.6 billion investment advisor in Los Angeles. "We consider this a core position," says Demorest, who uses the fund for as much as 30% of his clients' fixed-income portfolios. "We have a lot of faith and conviction in what they're investing in."
Friedlander buys pools of mortgages rather than individual securities, but says he keeps a close eye on quality. He likes to see a large component of jumbo or "ultralux" loans behind the securities. These typically perform well in an improving economy, and rising home prices mean there's more collateral should a default occur. Friedlander prefers mortgages for owner-occupied properties, which have lower default rates than those for rentals or vacation homes. He looks for borrowers with substantial equity, and likes to see geographic diversification within a loan portfolio.
Friedlander has been looking at other kinds of structured credit, including commercial mortgage-backed securities and the student-loan market. Should events like sharply rising interest ratespush investors in those areas into panicked selling, says Friedlander, "this fund is ready to pounce on the opportunity."
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IMO...it’s obvious that Friedlander and Prabhu left WMI in March 2008 to start Angel Oak Partners in July 2008 with a plethora of inside information that lead to profitable investments.
After closing the first fund in 2013 (assets under management = $30 million), they opened another fund (assets under management = $3 billion). What is interesting is the fact that they continued to invest in WMI subsidiary created MBS Trusts. “ ____________________
Per Angel Oak Fund Annual Report dated January 31, 2019:
Adj to Principal Balance due to Subs Recov = $239.27...
Ending Principal/Notional Balance = $562,478.29”
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IMO...my conclusions as of April 06, 2019:
1) The ex-Washington Mutual employees (Friedlander, Prabhu) left WMI on March 2008, then in July 2008 joined Fierman to start Angel Oak Fund.
2) Friedlander & Prabhu were intimately involved in the management of MBS Trusts that WMI subsidiaries created. They know exactly which tranches in each trust are the most profitable and which incurs the least amount of principal losses.
3) if you compare the portfolio of MBS Trust tranches Angel Oak Fund invests in, all the WMI MBS Trust tranches have increased in ROI from the previous annual report.
4) Washington Mutual Mortgage Pass-Through Certificates Trust, Series 2006-AR7, Class CXPPP started with zero Original Principal. As of 03-25-2019 shows an Ending Principal/Notional Balance of $562,478.29. Principal Balance has grown since the inception of the MBS Trust.
Friedlander and Prabhu knows the inside information regarding all the MBS Trusts and they know exactly which WMI MBS Trust tranches to invest in.
IMO...WMI has explicitly stated in quarterly and annual reports that they retained interests in senior, subordinate, and residual tranches in MBS Trusts WMI subsidiaries created from 2000-2008.
Bonderman et.al. is the ultimate insider (David Bonderman has been a WMI board member since 1996), don’t you think they know which tranches to invest in? I think they know exactly which tranches WMI retained.
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