Two new issuers are offering expanded-credit MBS, there’s a securitization backed by newly-originated second liens and the jumbo MBS market is showing more signs of life.
The performance of expanded-credit MBS was attractive to investors until interest rates increased throughout 2022. Higher rates cut into excess interest and slowed build-up of credit enhancement levels on outstanding deals.
Issuance of prime non-agency MBS nearly ground to a halt during the fourth quarter. For the full year, activity was down almost 60%. (Includes three data charts.)
Changes are under consideration for determining which firms qualify as community development financial institutions. Under a current proposal, CDFIs would have to follow the CFPB’s ability-to-repay underwriting requirements.
Six expanded-credit MBS started marketing within the past two weeks and there are also offerings of prime jumbos, HELOCs and even a credit-risk transfer deal from Santander Bank.
Non-agency MBS issuance perked up in early January as investor demand improved. Redwood Trust offered a jumbo MBS after a year-long lull in issuance and expanded-credit MBS issuers priced deals at tightening spreads.
JPMorgan Chase is rolling out its first non-prime mortgage-backed security stocked solely with investment-property loans underwritten using debt service coverage ratios. Chase so far has focused on prime borrowers.
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