Delinquencies on expanded-credit MBS are increasing but investors in the deals appear to be protected at the moment. A review of the sector by Fitch prompted many upgrades and no downgrades.

Angel Oak Capital Advisors and a portfolio manager with the company settled with the SEC, which alleged improper reporting of delinquencies on a fix-and-flip securitization issued by Angel Oak in 2018.

MBS and ABS tied to floating-rate assets could see rising delinquencies as interest rates increase. Inflation also remains a concern, though Fitch and Moody’s suggest that most deals can weather the storm.

Performance of non-agency MBS with manufactured housing loans hasn’t followed the trends seen in other sectors during the pandemic.

Borrowers with loans in various types of MBS and ABS could be stretched as interest rates increase, according to industry analysts. Prepayment rates are also likely to slow.

Congress is getting closer to passing legislation that would help legacy MBS and ABS transition away from LIBOR; there’s a securitization angle in Zillow’s move to discontinue its fix-and-flip business.

The difference between interest rates on non-QMs in MBS and the interest rate paid to investors in the securities is helping to protect investors from losses. Excess spread in the sector increased as seasoned loans were repackaged.

Changes to underwriting standards and home price appreciation helped investors in non-agency MBS largely avoid losses during the pandemic. By comparison, cumulative losses on subprime MBS during the financial crisis of 2008 hit nearly 20%.

Months of improvements in the performance of non-agency MBS stalled earlier this year, though delinquencies resumed a downward trend at the end of March.

After complaints from MBS investors regarding the reporting of performance of loans in non-agency deals, the Structured Finance Association released voluntary standards that could address the issue.