The coronavirus economic assistance package is signed, sealed and delivered but concerns remain over the ability of nonbanks to pay MBS holders in the event delinquencies spike over the short term.
A resumption in quantitative easing — at a pace that dwarfs asset purchases during the financial crisis — is just one of several Fed actions to keep credit markets functioning through the coronavirus crisis.
The Fed is taking steps to boost the market for agency MBS and certain sectors of the ABS market, while non-agency MBS isn't receiving direct relief. The Structured Finance Association called for an expansion of the new TALF.
Federal forbearance on government backed mortgages is a panacea to deal with the economic fall-out caused by the novel coronavirus. But eventually there will be implications in the primary and secondary markets.
Investor demand for non-QMs plummeted in recent weeks due to fallout from the coronavirus. Some non-QM lenders have stopped originating loans and others are repricing their products.
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