The upfront fees the GSEs charge for conforming jumbos and mortgages for second homes are set to increase. Some volume in those products will likely flow into the non-agency market.
Mortgages in the transaction were acquired by Western Alliance Bank on a correspondent basis and will remain on its balance sheet. Risk-sharing deals in the non-agency market are rare and largely involve megabanks.
Prospects for non-agency MBS issuance in 2022 look mixed, with expanded-credit activity expected to increase while volume involving non-agency jumbos and GSE-eligible loans could decline.
Western Asset Mortgage Capital plans to shed investments in commercial mortgages and shift to residential assets, including non-QMs. The REIT was taking losses on commercial investments.
Non-agency MBS issuers are off to a fast start this year, with four deals marketing this week. The MBS are backed by non-agency jumbos and GSE-eligible mortgages for investment properties.
In a familiar refrain, participants in the non-QM market suggest the sector is ready for takeoff. Still, technology in the non-QM market lags compared with the GSEs.
Issuers of prime non-agency MBS are increasingly removing loans subject to third-party due diligence reviews from the final MBS pools. Kroll Bond Rating Agency said the practice is a slippery slope.
The Structured Finance Association has developed a framework due diligence providers can use to help gauge QM compliance. A large chunk of the document focuses on verification of a borrower’s employment.
Some SWFs in other countries have extensive ownership interests in major corporations and sweep much of their profits into state coffers.
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