Monday Morning Cup of Coffee: Deutsche Bank cutting back on mortgage business?

Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

Last week, HousingWire reported on the shrinking prime jumbo mortgage securitization business, as a recent report from DBRS showed that as of September 25, there have been only 8 prime jumbo securitizations issued in 2016.

Compare that to 35 prime jumbo securitizations issued in 2015, 28 issued in 2014, and 31 issued in 2013.

Well, it appears that one major player could be scaling back its mortgage securitization business.

According to a report from Reuters, Deutsche Bank is planning to reduce its securitization business, and perhaps its mortgage business altogether.

From Reuters:

Deutsche Bank is looking to cut its loan securitization business further starting with repackaged U.S. mortgages, two people familiar with the matter said, as the lender braces for a large fine in the United States for alleged mis-selling of such debt.


A final decision about this core business is set to come early next year, the people said, and securitization cutbacks could become a central part of an expected strategic overhaul at the bank, once U.S. authorities have settled on a penalty.


“We have already shrunk the business over the last two to three years,” a person with direct knowledge of the bank’s plans said. “It could shrink a lot more. Not only sales and trading, but also in origination.”

According to Reuters, one of the reasons Deutsche Bank is considering scaling back its mortgage business is due to the amount of capital banks are now asked to hold in relation to such transactions.

Pam Patenaude, who was in HousingWire’s backyard last week at the Housing America’s Families Forum at the George W. Bush Presidential Library in Dallas, is rumored to be on the shortlist to serve as the secretary of the Department of Housing and Urban Development in President-elect Donald Trump’s administration.

But Patenaude, who currently serves as the president of the J. Ronald Terwilliger Foundation for Housing America’s Families, isn’t the only name that’s being considered to lead HUD beginning in January.

According to a Friday evening report from the Washington Post, Robert Woodson, who runs the Center for Neighborhood Enterprise in Washington, D.C., is also under consideration for the top position at HUD.

According to the Washington Post article, Woodson is a close advisor for Speaker of the House Rep. Paul Ryan, R-Wisc., on poverty issues.

From the article:

If selected, Woodson, who is black, would add diversity to Trump’s team. And he would be responsible for leading education and social reforms in predominantly African American areas, which Trump repeatedly described during the campaign as “failed” and vowed to repair.


“They seem to be very serious about it,” Woodson, 79, said in an interview with The Washington Post. “I’m not job hunting, but we’re talking about how I could possibly work with him. We’re talking about how we could work with those across the aisle to do these things together.”


When asked if Trump officials have specifically discussed a potential Cabinet appointment, Woodson said, “Yes, we’re talking about HUD.”

If selected to the HUD post, it could provide an indication of how closely the Trump administration plans to work with Ryan and the established Republican base in Washington.

Again from the Washington Post:

“It’s fair to say that Paul wouldn’t mind having me there to work with them on all of this,” Woodson said with a chuckle.

As a side note related to Patenaude and the Housing America’s Families Forum, HousingWire has served as a media partner with the Terwilliger Foundation since its inception and was in attendance at the event.

Our editor-in-chief, Jacob Gaffney, posted a couple of blogs from the event. Click here and here to check those out.

Also, check out the Twitter feeds of Gaffney (click here), our digital reporter, Brena Swanson (click here), and our CEO, Clayton Collins (click here), all of whom were in attendance at the forum.

And be sure to check HousingWire this week for more highlights from the event.

Michael Burry was immortalized on the big screen by Christian Bale in last year’s The Big Short, based on the book of the same title about the investors who cashed in on the housing crash.

And Burry isn’t done with the mortgage business.

Just over a year ago, he invested in a new mortgage venture, PeerStreet, which bills itself as an online marketplace for real estate-backed loans.

At the time, CNBC wrote of PeerStreet:

PeerStreet’s mission is to open up a particular segment of the real estate market — residential, typically non-owner occupied — to a wider swath of investors, thus adding capital to the system and ultimately bringing down borrowing costs.

Burry was one PeerStreet’s first investors, but now the company is adding another big name to its roster of investors, Andreessen Horowitz, the Silicon Valley venture capital firm.

Andreessen Horowitz boasts Facebook, Airbnb, Foursquare, Lyft, Skype, and Twitter in its current portfolio.

Now, Andreessen Horowitz is leading a $15 million round of Series A funding for PeerStreet.

According to an announcement issued last week by PeerStreet, Alex Rampell, general partner at Andreessen Horowitz, led the investment and will take a seat on PeerStreet’s board.

Additionally, the Kaiser Family Foundation, Rembrandt Venture Partners, Montage Ventures and others participated in the round of funding, the company said.

“PeerStreet is one of the fastest growing marketplace lenders we’ve seen, scaling to $165 million in originated loans in a little over a year, with great returns against a secured asset,” Rampell said. “They have a unique distribution model that allows them to leverage existing lending networks to lower loss rates, and grow without direct marketing.”

The company said that in its first year of business, it brought in “thousands of investors,” and returned more than $50 million to investors; all with zero losses.

PeerStreet also said that is significantly expanded its national footprint, and now works with more than 50 lenders and offers investments in half of the country.

“I speak for the entire team at PeerStreet when I say how incredibly excited we are to include Andreessen Horowitz on the roster of stellar investors in our company,” said Brew Johnson, CEO and co-founder of PeerStreet. “This round of funding will help us further execute on our goal of building a world class investment platform for real estate debt.”

And finally, as a heads-up as we move through the Thanksgiving week, HousingWire will be closed on Thursday and Friday as we stuff our faces with turkey, watch football and try to avoid hitting political landmines with our families – we’re just like you!

For all the subscribers of our daily emails, when you’re not fighting over that super cheap toaster oven on Friday, check your email for a little Black Friday fun from your friends at HousingWire.

And if you don’t subscribe to our emails, well, that’s just a tragedy that must be remedied post haste. Click here for the good stuff.

And with that, have a great week and a great Thanksgiving everyone! 

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