DoubleLine Takes the Next Logical Step by Pulling Mortgage-Backed Securities’ Development In-House

The market for mortgage-backed securities (MBS) that pool a collection of mortgages together into a package that can be marketed to investors is growing. DoubleLine Capital are looking to expand in this area more by taking on a role traditionally held by only brokerage houses and merchant banks by planning to create and securitize MBS products themselves.

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Regulatory Filings Reveal MBS Moves

We’ve covered Jeffrey Gunlach, head of the LA-based money manager before with his negative viewpoint on Bitcoin which continues to surge in price (over $16,000 now and counting) as investors pile in. His DoubleLine Capital is looking to open an investment advisory firm, Mortgage Opportunities Capital, based on located regulatory filings with the SEC, to take advantage of the growth in interest of MBS products.

Game Plan for Mortgage Opportunities Capital

DoubleLine through their planned Mortgage Opportunities Capital firm plans to seek new capital from institutional investors. Armed with plenty of money, they want to create their own mortgage-backed securities and then offer them back to investors. They also have advanced plans to step in and make significant purchases of existing residential and commercial real-estate loans using the funding from institutional investors, and then securitize part of the bundle of loans as a marketable security.

Strategic Play by Gunlach

Despite the surging popularity of MBS investing, there is a lack of availability for investors to gain access to a pool of quality home and commercial mortgages outside of traditional channels. This is because many are already covered through a guarantee made by either Fannie Mae or Freddie Mac. Much of the pre-financial crisis MBS loan issuance has ceased leaving a void to be filled for quality securities with attractive characteristics. It looks like Gunlach and his DoubleLine are trying to step into fulfill the supply void.

DoubleLine Aren’t Alone

DoubleLine aren’t the most recent investment firms to decide that originating mortgage-backed securities makes sense. Both Angel Oak Capital Advisors and Varde Management came to the same conclusion too.

Side-stepping investing in the MBS products put together by other investment firms, they can optimize the quality of each pool of mortgages, consider the credit rating of the borrowers, and decide on sensible pricing for their securitization. Not happy with letting other banks make the spread on creating MBS products, they’re making their own.

How Can Private Investors Get Involved with MBS Investing?

For the smaller investors, there’s always the option to grab a piece of this market. Using a live MBS quotes app, it’s possible to get advanced information on individual mortgage-backed securities that are being traded. The app tracks Freddie Mac and Fannie Mae MBS products with live prices, quality market analysis and charts to help better understand price movements over time.

Live Treasury rate data is also provided to offer a useful comparison because interest rates affect MBS pricing and valuation models; the app wouldn’t be that useful without this added feature.

It remains to be seen whether DoubleLine will pull off this big step into originating MBS products themselves. Clearly, they’re making a business move in this direction and are running with it.