REIT May Take Break in Buying HELs

American Residential Investment Trust Inc., a consistent issuer of home-equity loan paper since entering the market in early 1998, said it will forgo the asset-backed market for the foreseeable future.

In what was likely its last transaction for awhile, American Residential recently announced it completed a $335.2 million purchase and securitization of home-equity loans.

A company official said that with the portfolio now at $1.3 billion, there are no "plans on the drawing board" to arrange additional securitizations.

While there are no limits on the size of its portfolio, the official said the real-estate investment trust wants to maintain its liquidity and leverage ratios at around current levels. If it decides, at a later date, to add to its loan portfolio, it is likely the REIT would first issue some preferred shares to maintain the equity ratio.

The current $335 million addition to its portfolio was a bit unusual for the REIT, which usually buys whole loans in the market and arranged its own securitization programs.

In the most recent transaction, the official said, American Residential purchased a home-equity loan portfolio originated by Norwest Bank. The transaction was arranged by Greenwich Capital, which also arranged the securitization as part of the overall transaction. Additionally, the issue comprises certificates issued and guaranteed by Freddie Mac.

The official said that American Residential had accelerated its buying of loans over the past six months because it found the cost to be cheaper, allowing it to realize increased spreads which translated into a higher return. The REIT purchases only higher end subprime, first-lien home-equity loans.