Sequoia Mortgage Trust 2013-2 Annual Report - How They Did This Year

This guide explains how Sequoia Mortgage Trust 2013-2 performed this year. We have skipped the complex financial jargon to help you understand your investment and decide if it still fits your goals.

1. What does this trust do?

Think of this trust as a financial pass-through. It does not make products like a typical company. Instead, it holds a pool of residential mortgage loans. You hold certificates that entitle you to the cash homeowners pay back on their mortgages. This trust was formed in 2013 to bundle high-quality, prime residential loans. You receive monthly payments of principal and interest, minus fees for the companies managing the paperwork.

2. Financial performance

This trust is over a decade old and is now shrinking. The total unpaid balance of the mortgage loans has dropped significantly from the original $440 million. The trust is self-liquidating; as homeowners pay off their loans, the trust distributes those funds to you based on a set payment order. All the banks and companies responsible for collecting your money passed their annual compliance checks, confirming that the payment process remains accurate.

3. Major wins and challenges

The main win is stability. No single borrower represents 10% or more of the loan pool. This prevents any one default from threatening the trust’s health. Several companies, including PHH Mortgage, JPMorgan Chase, and Cenlar FSB, work together to manage these loans. The trust has clarified the roles of these companies regarding late payments, ensuring that specialized teams manage collections to keep your cash flow steady.

4. Financial health

The trust acts like a managed checkbook. The filing confirms that the service providers follow strict rules for collecting cash and making payments. The trust holds all collections in a specific account before distributing them. Audits confirm that the payment order—which pays senior investors before junior ones—is working correctly. Every dollar is tracked and distributed according to the original 2013 agreement.

5. Key risks

The main risk is how the underlying mortgages perform. As the pool ages, you face "prepayment risk," where homeowners pay off loans early, which reduces the total interest you receive. You also face "credit risk," or the possibility of defaults. While the trust monitors these payments closely, it cannot control the housing market or interest rates.

6. Competitive positioning

This is a legacy product. It does not compete for new business; it simply manages its existing loans until they are paid off. Because it is senior-heavy, it prioritizes returning capital to investors over the life of the remaining loans.

7. Future outlook

The trust remains a steady, predictable vehicle. It is in its final phase, meaning the pool size will continue to shrink monthly. As long as homeowners make their payments, the trust will pass those funds to you until the final loan is paid off.

8. Market trends

The trust remains fully compliant with regulations. All third-party managers have verified their processes, ensuring your money is tracked correctly. The trust continues to operate exactly as it did when it launched in 2013.

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Is this investment right for you? If you are looking for a predictable, self-liquidating income stream from a pool of established mortgages, this trust continues to function as designed. However, because the pool is shrinking, you should view this as a "run-off" investment—one that will eventually return all capital and close, rather than a long-term growth vehicle. If you rely on this for steady monthly cash flow, it remains a stable option, provided you are comfortable with the natural decline in the total loan balance over time.