Investors in some prime non-agency MBS are taking losses even though loans in the deals are performing well. The red ink is tied to variable servicing fees and high prepayment rates.
The market for MBS with non-qualified mortgages is growing by leaps and bounds. However, there is some skepticism about whether there’s enough demand to support $50 billion in annual issuance.
Deal volumes in the non-agency MBS market are elevated as issuers work to meet investor demand. Angel Oak, Chase and Invictus are bringing large deals and more issuance is in the pipeline.
Noting that not a single SEC-registered non-agency MBS has been issued since disclosure requirements were tightened in 2014, the regulator is planning to revisit the standards.
Citadel Servicing, which played a key role in the rebirth of nonprime lending this decade, will have new owners soon. But will the firm finally tap the securitization market? Stay tuned.
Some investors prefer buying non-agency mortgages via whole loan transactions rather than stocked in MBS. Whole loans offer better yields and more loan information.
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