Alternative investment manager Pretium plans to buy Deephaven, a residential mortgage-backed securities issuer that operates outside the qualified mortgage market, from Varde Partners.
Terms of the transaction were not disclosed. The deal is expected to close in the second half of 2019 if it receives necessary regulatory approvals and meets closing conditions.
Deephaven will be a “natural extension of Pretium’s existing strategies in single-family rentals and mortgage credit,” Donald Mullen, founder and CEO of Pretium, said in a press release.
Founded in 2012, Deephaven has worked with Varde as a capital partner since 2014. Deephaven has invested about $4 billion in non-QM loans over the past five years. There has been an estimated $30 billion in non-QM RMBS issuance since 2015, according to Fitch Ratings.
Pretium has more than $10 billion in assets under management. As a single-family rental owner and operator, it works with more than 32,000 homes in 15 U.S. markets identified as having strong growth prospects. Its in-house real estate platform, Progress Residential, has more than 800 employees, and its mortgage credit unit has acquired north of 31,000 loans with a collective unpaid principal balance of $5.7 billion.
In addition to owning Deephaven, Varde also invested in excess mortgage servicing rights and made selective investments in the commercial sector.
Home loans in the private market that fall outside the QM definition lack a safe harbor from liability under the Consumer Financial Protection Bureau’s ability-to-repay rule.
There is some speculation that non QM could be a promising niche if the government-sponsored enterprises’ temporary exemption from it expires as scheduled in 2021, and a uniform standard is applied to private and government-related markets.