Six issuers offered expanded-credit MBS in recent days, ending a nearly 30-day pause in issuance. Loans in the deals have seasoned for longer than the turn times seen for prime non-agency MBS.
Mortgages in the transaction were acquired by Western Alliance Bank on a correspondent basis and will remain on its balance sheet. Risk-sharing deals in the non-agency market are rare and largely involve megabanks.
Prospects for non-agency MBS issuance in 2022 look mixed, with expanded-credit activity expected to increase while volume involving non-agency jumbos and GSE-eligible loans could decline.
Western Asset Mortgage Capital plans to shed investments in commercial mortgages and shift to residential assets, including non-QMs. The REIT was taking losses on commercial investments.
In a familiar refrain, participants in the non-QM market suggest the sector is ready for takeoff. Still, technology in the non-QM market lags compared with the GSEs.
Expanded-credit mortgages gained market share as total first-lien originations declined in the third quarter. Still, the sector accounted for only 1.1% of the total origination pie. (Includes data chart.)
Angel Oak is the latest expanded-credit lender to offer mortgages based on an individual tax identification number to individuals not eligible to obtain a Social Security number.
Non-QMs offer the promise of strong margins and a product to replace refinance volume. They also account for a miniscule portion of mortgage originations.