Whole loan trading gives rise to Morgan Stanley conduit rumor - Debtwire

Whole loan trading gives rise to Morgan Stanley conduit rumor

30 October 2017 - 12:00 am

A Morgan Stanley spokesperson denied wide-spread market chatter that the bank is planning a new non-agency mortgage conduit.


Several sources, including two loan investors, a capital markets executive and a former Morgan Stanley banker, say the investment bank’s recent bulk loan purchase activity is consistent with that of a conduit. The purchases are focused on “squeaky clean prime jumbo” loans, ostensibly for the investment of wealth management money, according to one of the investors and the capital markets source.


But the bank has no non-agency mortgage conduit, according to the spokesperson. The spokesperson declined to comment further.


In the past, Morgan Stanley has held non-agency loans originated by PHH Mortgage for its high-net worth clients, said a third investor who was not aware of a conduit at the bank.


In a potentially related move, Morgan Stanley will bring mortgage originations for its clients in house when its third-party provider PHH Mortgage exits the business, Reuters reported last month. Morgan Stanley had extended the agreement with PHH through 31 October, according to an April 2016 PHH press release.


A conduit would represent a significant expansion from the business of financing mortgage credit, the sources said. Any conduit would compete with REITs and other investors who often complain about their own difficulty in sourcing higher-rate non-agency loans as government lending dominates.


by Al Yoon