Banks, the largest holders of agency MBS among investor groups, aren’t expected to be big buyers this year. Money managers helped to fill the void left by banks last year, but that might not continue into 2024.

Fed stays course on MBS sales; SFA close to revising data tape for prime non-agency MBS; MBS on watch for rating upgrades by Fitch; subprime auto ABS impairments rise; commercial MBS delinquencies decline; Fannie sees tighter spreads for latest CRT; Morningstar not ready to give positive commercial MBS credit for “mass timber” construction.

Delinquencies on loans in agency MBS increased across the board in the fourth quarter of 2023. The rate of performance deterioration quickened compared with trends earlier in the year. (Includes data table.)

Bank of America Global Research is projecting an increase in agency MBS issuance next year despite muted demand from banks.

Capitol Federal Savings Bank took a loss of about $200 million on the sale of $1.3 billion of securities (largely MBS) with low interest rates. The bank reinvested the proceeds in higher-yielding assets and paid off some debts. Pacific Premier Bank made a similar move this week.

HUD IG launches inquiry into Ginnie’s handling of Reverse Mortgage Funding’s bankruptcy; DBRS revises rating criteria for commercial MBS; WeWork exposure in commercial MBS; another record profit for Farmer Mac; ETF targets newer agency MBS.

Spreads on agency MBS widened during the third quarter, leading to a decline in values for agency MBS holdings. Still, investors stress that agency MBS is an attractive investment option.

Bank demand for agency MBS is weak, leading to wider spreads and losses on MBS holdings for some. Banks are also reducing their lending activity, providing an opening for nonbanks.

Delinquencies on securitized mortgages increased in all parts of the agency market during the third quarter. The increase was concentrated in early-stage delinquencies. (Includes data chart.)

Ever since the Fed started its rate-hiking cycle, the spread between interest rates on loans in agency MBS and the 10-year Treasury rate has been elevated. Prepayment risk is to blame and there’s no easy fix.