Mortgage-backed security investors remain interested in non-qualified mortgages, though the hot market may be cooling off. A particularly large non-QM MBS from an affiliate of Western Asset Management Company was delayed in closing and downsized slightly as some firms suggest that returns in the market slipped in the first quarter. WAMC’s Arroyo Mortgage Trust 2018-1 was initially sized at $1.25 billion, according to presale reports published near the end of April by ...

California continues to account for the largest share of non-agency jumbo originations but it lost some market share in 2017, according to an Inside Nonconforming Markets analysis of data from the Home Mortgage Disclosure Act. Some $317.29 billion of jumbos were originated in 2017, down 9.7 percent from the previous year. The analysis is based on originations of first-lien, single-family mortgages, with loan-limits determined at the county level. Originations of ... [Includes one data chart]

Redwood Trust boosted its net income in the first quarter of 2018 and continued to increase its originations of expanded-credit mortgages. The real estate investment trust is seeing strong demand for the loans in the secondary market and Redwood is set to issue its largest expanded-credit mortgage-backed security to date. Redwood had $46.9 million in net income in the quarter, up 51.4 percent from the fourth quarter of 2017 and up 26.7 percent from a year ago. The company sold ...

The second prime non-agency mortgage-backed security from an affiliate of American International Group is a lot like the MBS the company issued in March, but the new deal received favorable treatment from the rating services, with lower credit enhancement on the senior tranche. PSMC 2018-2 Trust will be a $429.4 million issuance, according to presale reports published last week. The mortgages have an average credit score of 773, an average debt-to-income ratio of 33.0 percent ...

As soon as next week, the House could vote to approve a regulatory relief bill that already passed the Senate. Among numerous other provisions, the Economic Growth, Regulatory Relief, and Consumer Protection Act would grant qualified mortgage status to certain loans held in portfolio by smaller banks even if the mortgages would otherwise be non-QMs. Mick Mulvaney, acting director of the Consumer Financial Protection Bureau, also said ... [Includes four briefs]

Originations of non-agency jumbo mortgages declined in the first quarter of 2018 at a number of banks that provide early disclosures about their business. Officials cited seasonal factors for the lower volume and suggested that production will bounce back in the second quarter. First Republic Bank, the largest of the four banks in terms of jumbo production, had $2.33 billion in total originations in the first quarter. Jumbos tend to account for more than 90.0 percent of its total production ...

An affiliate of Western Asset Management Co. is set to issue one of the largest post-crisis non-agency mortgage-backed securities. The planned $1.25 billion issuance differs in a number of ways from deals with non-qualified mortgages from other issuers. Arroyo Mortgage Trust 2018-1 will be the first non-QM MBS from WAMC. The firm has been stockpiling non-QMs and other non-agency mortgages since the end of 2014. Loans in the pending MBS have seasoned for an average of ...

Chimera Investment issued a non-agency mortgage-backed security this week stocked with loans initially aggregated by Bank of America. The deal marked a return to the jumbo MBS market for the real estate investment trust, with officials noting strong demand from MBS investors. The $380.0 million CIM Trust 2018-J1 was largely backed by non-agency jumbo mortgages along with a 5.5 percent share of loans eligible for sale to the government-sponsored enterprises. BofA acquired ...

Spreads on mortgage-backed securities with non-qualified mortgages have tightened in recent years, according to S&P Global Ratings. “Since non-QM deals first appeared in 2014, their AAA spreads have tightened, suggesting that the market may be growing more comfortable with this asset class,” the rating service said. The spread measures the price of MBS tranches compared with a benchmark international swap rate. Tighter spreads indicate greater demand from investors ...

The retail channel is the main source of expanded-credit mortgages, followed by brokers, according to a new analysis by Inside Nonconforming Markets based on loans in non-agency mortgage-backed securities issued since 2016. Some 57.0 percent of loans in expanded-credit MBS issued in recent years were sourced through the retail channel. And 36.6 percent came through brokers. The shares are based on deals that disclose channel sourcing ... [Includes one data chart]