You're watching...
Angel Oak Capital co-founder Sreeni Prabhu on investing in non-agency mortgage-backed securities.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Well let's say that you are not in the market to buy -- house and said you're looking to make some money on the housing market what we're hearing about the housing recovery where should you be looking.
We'll treaty probably -- -- -- -- co-founder and C I had joins me now Fox Business excludes about let's talk about your funds and give up the ticker -- and GLX.
It's an -- come fun up 23% over the past year but it's.
The majority your fund is non agency mortgage backed securities.
Why go this way it's -- -- That's right.
Quote.
I think -- be -- that the best and the most efficient way to participate in the housing recovery is sued the non agency mortgage backed securities market.
And what we focus on -- very -- the most value in that space is mortgages or is it -- to 2006.
We have seven plus years of payment history on these borrows a lot of these -- to have 15%.
Equity left in their homes and -- be able to get.
About 5% to 7% risk could just in years and pushes these securities at about ten to fifteen points -- discount.
So in the stable housing environment used to be able to by this -- in the price appreciation of these mortgages.
About these mortgages if you're saying that these are older -- says -- as those mortgages are paid off.
Then wouldn't you need to start to seek out that -- march mortgage market which.
You could say is risky if it's not agency debt or you could say that with the credit tightness of banks and it's it's a good -- you see you soon -- That's that's correct and lot of these that the so called legacy securities if you think about the market this is approximately a trillion dollar mortgage market.
System a lot of these legacy securities a legacy loans out there in the market.
At the same time all the new viewers and mortgages in -- of the mortgages originated over the last couple of years.
Are better quality -- because banks have stepped away from lending so right now obvious focus on legacy securities -- 2006 and prior.
And there's a lot of those loans there's still good but as we continue -- -- evolved.
The new -- is -- mortgages would be a great place to invest in the long run we'll.
But now let's get -- my question was the credit profile what type of credit profile are we talking here.
And it still let's focus on the new ones because the older yet mortgages Hampshire.
High quality but the but the newer ones what is that -- all right.
That's a great question a lot of the mortgages right now if you -- a -- and -- -- looking at getting a non -- mortgage on this jury pristine.
Clarity -- which is 765 preschool you gotta put 25 to 30% down on your house.
You ought to have a W two income.
If you don't have all of those characteristics.
Is very hot to get a mortgage will assist.
If you can -- -- the mortgages the you can have 705 -- -- -- -- -- prime borrower.
You can -- have a good equity -- homes.
And -- the mortgages that.
Again -- Would be better index of housing recovery and have a -- -- to -- What about the Fed in all of this what happens if we start to see the Fed.
Pullback maybe stop the bond buying program stop the mortgage backed security program.
The purchasing.
In the next year would that affect.
Your fund at all.
That's a great question that's in the media -- down this visit interest -- related markets and the credit related markets and what the Fed's been targeting.
Is agency mortgage backed securities as of mortgages backed by the government.
And they have driven that have -- use on those assets to very low yields.
At the same time.
If you can add also that they can supply out of the marketplace that if fed takes a step back and interest rates to rise in the future.
The value of those mortgages even the credit.
Is pristine.
That interest in her bed rises and affect the valuation of those mortgages we -- -- the other side non agency mortgages which is what -- -- just.
Are more.
Floating rate assets and so -- rates rise.
-- -- Actually that -- you know on the securities with a rise -- interest rates would be -- there's it's a bit of they had to focus on that part of the housing market.
-- fed is not bush is seeing these non agency mortgages -- OK and and -- report let you guys trying to confirm AN GLX this was launched in 2011.
Is that cracked that's.
That's correct okay -- Iran recently new fund of solid performance the percentage performance there.
This is there at this point Wall Street -- probably thank you very much -- capital co-founder and CIA we'll be watching thank you.
Thank you.
