MBS creation took off like a rocket in the second quarter and the way lenders are feeling today the good times should last for a few more months at least. But there is a downside: prepayment speeds.
Bullish signs abound for non-QM securitizations. Top-ranked lenders Angel and Citadel Servicing Corp. are coming off record originations for 2Q19. Angel Oak believes the market is underestimated.
A sharp increase in the securitization rate of nonprime and expanded-credit mortgages was partly due to seasoned loans and GSE-eligible mortgages. Agency securitization rates were sluggish.
Agency MBS trading hit a yearly low in May. What lies ahead will be determined by the Federal Reserve. Will the central bank ease credit? And if so, what will happen to MBS prepayments?
The Federal Reserve reduced its holdings of agency MBS by $47 billion during the first quarter, but several other investor groups picked up the slack. Total MBS outstanding grew 0.4% during the first three months of the year.
The trading volume was decent during April but paled in comparison to most other months this year. Meanwhile, investors are worried about the usual: declining interest rates and prepayment rates. And a new wild card has emerged: A possible rate cut by the Fed.
Annaly Capital Management Corp. and AGNC Investment Corp. continued their MBS-hoarding ways during the first quarter but have had to deal with paper losses and negative hedging marks thanks to lower interest rates.
Ginnie Mae has completed liquidity talks with its 14 largest nonbank issuers, but has yet to say what transpired during the meetings. But all that could change when the agency hosts its annual summit in June.
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