Haircuts on Re-Remics have remained very low. Prices on the most senior pieces have also held up better than the indices show. This is a pretty safe asset, as I detailed earlier--40% subordination gives you lots of downside protection.
Plenty of dealers are extending repo financing to higher quality customers like Invesco (and I mean the entire organization, which includes a big global fixed income manager). What evidence do you have to the contrary and why are you so convinced that there will be a problem here accessing financing? There is just no support for the scenarios you keep painting.
I do want to buy credit--when it is the top of the quality stack and unlikely to experience any losses yet is priced as if there will be huge losses. Why buy something riskier when I have confidence in the credit quality here? The margin of safety is a lot higher.
IVR is like my personal Re-Remic trading at 70 cents on the dollar. It can trade at 60 or 50 cents, I realize, but ultimately it will go to par. And I get paid well to wait until that day.
I don't know what the terms of the BofA deal were or how much was invested by IVR but IVR is an investor in the Invesco Mortgage Recovery Fund (managed I think by WL Ross). My guess is that IVR's portion of the investment was maybe $20-30 million--probably the low risk, senior piece of the deal (in-line with IVR's fairly conservative strategy). The rationale for the deal would seem to me as fairly simple: BofA is bloated with assets they need to sell and was anxious to offload this chunk. WL Ross is typically a smart, vulture-type buyer. Maybe this deal was done at 65 cents on the dollar with BofA providing a good chunk of the financing. This is all just speculation on my part but I would tend to give IVR mgt the benefit of the doubt in putting capital to work in a fairly low risk/high return manner given that their return hurdles are in the mid-high teens (and their current cost of capital is extremely high, which also argues for a very high return).