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.
Four deals were brought to the market in the past two weeks and more are in the works. However, issuance will slow as the recent activity was backed by loans originated before non-QM lenders halted production.
Originations fell by 20% as the market was disrupted in March by the coronavirus. Most of the major lenders suspended production during the month, ending the quarter with declines. (Includes data chart.)
After issuance ground to a halt in March, five non-QM MBS deals came to the market in May and more are on the way. Transactions have been stocked with slightly seasoned mortgages.
Among the lenders currently offering non-QMs, underwriting standards are tighter and interest rates on the loans are higher than earlier in the year. Industry participants are optimistic that the sector will rebound, eventually.
A coalition of industry trade groups asked the SEC to revise standards for publicly registered non-agency MBS. They suggested aligning standards with practices for private placements.
Neuberger Berman issued a non-QM MBS this week, ending a lull in issuance that started in late February due to volatility from the coronavirus. Other issuers also plan to return to the market.
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