The supply of mortgages for non-agency MBS is expected to decline, leading to concerns that industry participants might loosen underwriting standards to prop up volumes.

Amid the change in quarterly periods and SFA’s annual conference, four issuers of non-agency MBS launched deals in early October.

Attendance was down at the recent Structured Finance Association convention in Las Vegas. Discussions touched on the non-agency MBS market and the GSEs, among other issues.

The difference between interest rates on non-QMs in MBS and the interest rate paid to investors in the securities is helping to protect investors from losses. Excess spread in the sector increased as seasoned loans were repackaged.

Industry groups want the Federal Deposit Insurance Corp. to specify which payments into mortgage servicing accounts would qualify for coverage.

Changes to underwriting standards and home price appreciation helped investors in non-agency MBS largely avoid losses during the pandemic. By comparison, cumulative losses on subprime MBS during the financial crisis of 2008 hit nearly 20%.

Issuers are still stocking non-agency MBS with GSE-eligible mortgages for investment properties. Lenders and issuers are considering their options following a suspension of limitations placed on the GSEs.

Lenders can’t keep up with the demand for non-QMs from investors in the secondary market. Originations are expected to grow when the agency refi wave crashes.

Rocket’s $968.4 million jumbo MBS is one of the largest from a nonbank post 2010. And after years of contributing non-QMs to MBS issued by others, AmWest is going to issue its own deal.

CoreVest issued a securitization involving bridge loans for residential properties; a prime non-agency MBS issued by JPMorgan Chase in 2018 is on watch for a downgrade.