Only $2.58 billion of delinquent mortgages were repurchased from Ginnie MBS in the second quarter, a 65.4% decline from the previous quarter.

With FHA loan performance relatively strong and the spike in interest rates this year, early buyout activity from Ginnie MBS is limited. Overall, removals are slowing thanks to elevated interest rates. (Includes data chart.)

The Federal Open Monetary Committee said it also plans further reductions in its holdings of mortgage-backed securities.

Delinquency rates on FHA and VA loans pooled in Ginnie Mae MBS increased in the second quarter of 2022. Most of the spike was on the FHA side. (Includes four data charts.)

Issuance of prime non-agency MBS fell sharply in the second quarter of 2022 as rising interest rates limited investor demand for the securities. Nonbanks remained the main source of prime mortgages. (Includes three data charts.)

Non-agency lenders looking to sell mortgages with lower interest rates only have whole-loan sales as an outlet as MBS investors wait for new originations.

Sprout originated about half of the loans in a new $293.5 million expanded-credit MBS from an affiliate of Lone Star Funds. Fitch Ratings assessed the deal and suggested that risks tied to Sprout were limited.

Non-QMs are a double-edged sword for lenders, offering attractive margins along with extreme volatility risk. Industry analysts suggest demand for the loans in the secondary market will recover when lenders start selling mortgages with higher interest rates.

Expanded-credit MBS have been few and far between in July while non-agency MBS issuers have yet to offer a prime deal during the month.

MBS and ABS participants gathered in Las Vegas this week, discussing volatility and weak demand from investors. The consensus? Buyers will remain cautious until getting a better handle on the Fed’s actions.