Investors in some prime non-agency MBS are taking losses even though loans in the deals are performing well. The red ink is tied to variable servicing fees and high prepayment rates.
Provident Funding is set to issue a non-agency MBS with standard mortgages eligible for sale to the GSEs. An affiliate of Cerberus is also planning a relatively large deal backed by seasoned mortgages.
The Fed has significantly stepped up purchases of agency MBS in recent months. However, the central bank's balance sheet shows no sign of an increase in MBS holdings, prompting some questions. Meanwhile, shoring up the repo market might be a factor.
The $302.8 million transaction is comprised of fully collateralized excess-of-loss reinsurance coverage from Triangle Re on a portfolio of existing MI policies written this year.
The novelty of prepayment as a primary risk factor is one of the charms MBS have for foreign investors, particularly sophisticated institutional investors. That’s because it has a relatively low correlation factor with other assets.
The market for MBS with non-qualified mortgages is growing by leaps and bounds. However, there is some skepticism about whether there’s enough demand to support $50 billion in annual issuance.
Kevin Keyes, CEO of Annaly Capital Management since September 2015, abruptly parted ways with his employer without much in the way of explanation. The REIT’s shares continue to trade in a tight price range.
Deal volumes in the non-agency MBS market are elevated as issuers work to meet investor demand. Angel Oak, Chase and Invictus are bringing large deals and more issuance is in the pipeline.
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