Performance on non-agency MBS has improved after the spike in late payments seen in the spring. However, borrowers who are still delinquent could prompt losses for investors.
Fed by massive originations of agency-eligible mortgages, the securitization rate rose 5.1 percentage points to 80.4% in the third quarter of 2020. That's the highest it's been since 2013. (Includes data chart.)
As borrowers in prime non-agency MBS transition out of forbearance plans, investors in the deals could experience reduced cashflows due to interest shortfalls.
With a relatively high share of borrowers missing mortgage payments, investors in non-agency MBS are seeing reduced cash flows and, in some cases, losses. Though mortgage performance is improving, the outlook for investors remains uncertain.
The creation of a U.S. sovereign wealth fund could grease the skids for an end to the conservatorships of Fannie Mae and Freddie Mac.
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