Business Context and Reporting Period
This Form 8-K Current Report was filed by Five Oaks Investment Corp. on November 10, 2015. The filing discloses the entry into material definitive agreements related to the securitization of residential mortgage loans through the company's proprietary program, Oaks Mortgage Trust.
Key Financial Metrics and Transaction Details
- Transaction Volume: The company's subsidiary, Oaks Funding LLC, acquired prime jumbo mortgage loans totaling $251.3 million.
- Securitization Structure: Loans were sold to Oaks Mortgage Trust Series 2015-2, which issued certificates backed by these loans.
- Investment Holdings: Five Oaks Investment Corp. purchased all Class A-X-1 Certificates (an IO security) and the subordinated Class B Certificates issued by the Trust.
- Asset Retention: Five Oaks Acquisition Corp. retained the mortgage servicing rights (MSRs) associated with the contributed loans.
- Financial Performance: The filing text does not provide specific values for revenue, profit, cash flow, margins, debt, or liquidity metrics for the reporting period.
Material Changes and Strategic Initiatives
The primary material change is the execution of the Mortgage Loan Purchase and Sale Agreement (MLPSA) and the Pooling and Servicing Agreement (PSA). This transaction represents the deployment of the company's proprietary securitization program, Oaks Mortgage Trust. Management expects this program to reduce the company's securitization expenses going forward, though no assurance of such cost reductions is provided.
Guidance, Risks, and Contingencies
- Outlook: The company anticipates reduced securitization expenses due to the proprietary trust program.
- Flexibility: The company is not obligated to hold the purchased certificates and may sell them at any time.
- Indemnification: Under the Certificate Purchase Agreement (CPA), the company and its subsidiary have agreed to indemnify the initial purchasers (Barclays Capital Inc. and Credit Suisse Securities (USA) LLC) against claims, damages, or liabilities relating to the offering.
- Risks: The filing notes that while expense reduction is expected, no assurance can be given regarding the achievement of this goal.
Key Facts for Investor Verification
- Verify the specific terms and yield of the Class A-X-1 (IO) and Class B certificates purchased by the company.
- Confirm the valuation and accounting treatment of the retained mortgage servicing rights (MSRs).
- Review the full text of the MLPSA (Exhibit 10.1) and PSA (Exhibit 10.2) for detailed covenants and risk factors.
- Monitor future filings to assess the actual impact of the Oaks Mortgage Trust program on securitization expenses.