Investors that once focused on lower tranches of non-agency MBS are shifting up in credit, seeing just as strong returns from AAA-rated tranches with fewer risks. Investors in agency MBS are also changing strategies as interest rates rise.
In 2020, the SEC made a move to apply a disclosure rule that had been in effect for nearly 30 years to MBS and ABS. Industry participants have been able to delay enforcement of the rule while seeking changes to the disclosure requirements.
Angel Oak Mortgage suffered widening losses in the second quarter amid weak demand in the secondary market for non-QMs. Still, officials at the REIT suggest that things are looking up.
For the first time since May, a non-agency MBS with GSE-eligible mortgages for investment properties hit the market. And Change Lending switched products with its latest offering, focusing on mortgages with income verification. Overall, issuance remains slow.
Angel Oak Capital Advisors and a portfolio manager with the company settled with the SEC, which alleged improper reporting of delinquencies on a fix-and-flip securitization issued by Angel Oak in 2018.
There’s nowhere to hide for non-agency MBS issuers as quickly rising interest rates prompt losses. Loans the issuers are looking to sell have seen limited demand and lose value when retained even short-term.
While credit unions will be treated on par with banks, state housing finance agencies will be fully exempted from capital requirements imposed on those participating in the Ginnie MBS program.
The traditional leaders of contributions to expanded-credit MBS slowed their activity in the second quarter, with smaller entities filling some of the void. The types of loans going into MBS also shifted somewhat. (Includes three data charts.)