The impairment rate on non-QM MBS increased by more than five times in April as borrowers felt the side effects of the coronavirus. The worst performing non-QM loans were those to self-employed borrowers.
Redwood MBS could be downgraded due to stop-advance feature; Moody’s assesses Finance of America Mortgage; non-QM lender PCMA signs lease for new headquarters.
Certain non-QM lenders’ underwriting tactics might not meet the CFPB’s ability-to-repay rule, according to Moody’s. It suggested tighter standards for bank statement mortgages and loans to the self-employed.
Annaly Capital Management and Ellington Financial are both generating double-digit returns from aggregating mortgages and issuing non-agency MBS. The firms plan to increase their activity in the sector.
At least eight expanded-credit MBS rated by DBRS Morningstar suffered losses in the second half of 2019. Investors, though, were protected due to high credit enhancement levels.
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