More investors would be willing to buy new non-agency mortgage-backed securities if loans in the deals had prepayment penalties, according to an industry analyst. The penalties offer investors protection, but their use has been limited by the Consumer Financial Protection Bureau’s ability-to-repay rule, among other factors. Lawrence White, a professor and deputy chair in economics at the New York University Stern School of Business, suggested that the non-agency MBS market would see increased demand from investors, particularly insurance companies, if loans in non-agency MBS included prepayment penalties. “These institutions have largely stayed...