Close to $15 billion of GSE-eligible mortgages have gone into non-agency MBS this year, including many loans for investment properties and second homes. That’s expected to slow due to a removal of restrictions on the GSEs.
Some of the Trump-era restrictions placed on the GSEs have been put on hold for at least a year. That includes a cap on acquisitions of mortgages for investment properties.
The blueprint would reverse capital requirements set in December, which offered few incentives for the GSEs to complete credit-risk transfer transactions.
Thanks to restrictions placed on the GSEs, investment-property mortgages are flowing into non-agency MBS. Some lenders are issuing deals on their own while others are turning to aggregators like Credit Suisse.
Industry consultants are cautioning companies to take steps to ensure their fair housing compliance teams are ready to defend an expected uptick in enforcement actions.
The offerings in the non-agency MBS market range from deals backed by prime jumbo mortgages to investment-property loans that were eligible for sale to the GSEs to non-QMs.
While Fannie and Freddie refi business fell sharply in the second quarter, there were significant increases in loans with low credit scores. Meanwhile, the fastest growing sectors of the GSE purchase market had higher LTV ratios. (Includes two data charts.)
Issuance of non-agency securities increased 81.3% in the second quarter of 2021. Volume was boosted by the spike in deliveries of GSE-eligible mortgages following regulatory changes in the agency market. (Includes data chart.)