Castlelake LP, Invictus Capital Partners team up on non-QM

Castlelake LP has agreed to purchase a maximum of $2 billion in new non-agency mortgages from Invictus Capital Partners through a partnership in which other terms were not disclosed.

The buyer is making a capital commitment aimed at helping Invictus scale its Verus correspondent-investor loan platform, which has laid claims to being the main issuer of non-qualified mortgage securitizations since 2017.

The partnership between alternative investment managers adds to signs that investors see private mortgages as attractive, albeit not immune to risk given policy-driven volatility in broader markets. While the Trump administration is dedicated to scaling back the public sector and possibly privatizing key  secondary market players, it also has been doing things like adding tariffs that affect pricing and availability of certain homebuilding materials, with exemptions for some.

“This relationship with Castlelake highlights the recognition from sophisticated alternative investment managers of the significant opportunity to invest in high-quality loans in the residential credit market,” said Michael Warden, CEO and senior managing director at Invictus, in a press release.

Isaiah Toback, a partner at Castlelake, said in the release that Invictus’ loan sourcing and credit underwriting approach is in alignment with his company’s “granular data-driven in investment philosophy and focus on downside protection.

“We look forward to working with the Invictus team as they continue the scaling of their loan investment capabilities and provide our investors with exposure to what we view as attractive pricing in the private residential loan market,” added Toback, who also is Castlelake’s deputy co-chief investment officer.

Castlelake has partnered with other entities to finance or buy around $7 billion of residential and commercial real-estate loans in total since last year. CEO Evan Carruthers and Executive Chairman Rory O’Neill founded Castlelake in 2005 and it manages around $25 billion in funds for a diverse global client base. Castlelake employs 220 people in North America, Asia and Europe.

Near the end of 2024, Verus Mortgage reported that it had completed a total of 65 rated securitizations. Verus specializes in non-QM and investor rental loans, for which borrowers pay up in ways that can be attractive to investors. Its products range from first liens to home equity lines of credit, one of the latest non-agency products originators have been seeking showing more interest in as investor demand has grown.

Invictus has purchased more than 70,000 loans with a balance of over $35 billion in total since 2015 and CEO Michael Warden, who previously served as the head of fixed income at Friedman, Billings, Ramsey & Co., founded it in 2008. Employees own a majority equity stake in the company. Invictus and its affiliates employ around 200 professionals, including some with experience in residential debt that includes work in higher-yielding, distressed investments.

With broader capital markets increasingly volatile due to uncertain investor reactions to unprecedented steps the Trump administration has taken, including attempts to intervene in monetary policy decisions traditionally made independently, there’s widespread anticipation of heightened need to manage distress. 

Types of distress that could materialize include an economic slowdown, according to a recent M&T Bank forecast. M&T does not anticipate a full-blown recession.

Back in March, a broader group of business economists showed some concern about a recession but a greater fear about inflation potentially remaining heightened for over a year. Monetary policymakers have not wanted to lower interest rates until a key inflation measure reaches a 2% target.