A secondary market is developing for COVID-19-related forbearance loans where the mortgage has already funded but the consumer has asked for relief from their monthly payments.
The issue presents a potential conflict in securitization transactions because lenders typically take a borrower’s word on income reporting, according to two Federal Reserve economists.
Investors in the ABS market are mostly staying on the sidelines waiting for the coronavirus volatility to play itself out. Meanwhile, some investors are focusing solely on AAA-rated assets.
Nonbank Ginnie Mae issuers increased their borrowings under the PTAP program in May but not significantly. Next up: FHA’s forbearance policy on loans in progress.
Taking a close look at the much more stringent capital norms for the GSEs, Matthew Howlett, an equities analyst at Nomura, reiterated his buy rating for Fannie Mae. The hitch? He assumes a ROE of 11.4% by 2024.
If the new rule had been in effect at 3Q19, CRT would have reduced the GSEs’ capital requirement by $22.1 billion. On the other hand, CRT provisions under the 2018 version would have provided $41.3 billion.
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