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An Old Champion Returns for Mortgage-Based Bonds

"Lewis S. Ranieri helped pioneer mortgage-backed securities in the 1980s. On Thursday, his new firm priced its first mortgage bond deal.

"With the recent turmoil in the bond markets, however, the offering was not without drama. The structure of the offering was changed to offer buyers more protection against losses, according to a person briefed on the matter who was not authorized to speak about the private deal.

"The firm, Shellpoint Partners, of which Mr. Ranieri is chairman, sold  $251 million in residential mortgage-backed securities tied to loans that are not backed by Fannie Mae or Freddie Mac. The largest portion of the deal was sold at a rate of 2.85 percentage points above ultrasafe government debt, according to the person briefed on the deal.

"Through a spokesman, Mr. Ranieri and Shellpoint declined requests for comment.

"Bond prices have fallen since the Federal Reserve indicated that it planned to start reducing the stimulus it has used to keep interest rates low since the financial crisis.

"For residential mortgage bonds without government backing, the fall has been steep. After a rapid climb in 2012, prices of these bonds began to stumble this year and have fallen about 3.5 points on average since the beginning of June, according to an index of prime and subprime mortgage-based securities from Markit."

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