It’s been an ugly year for retail chain bankruptcies, which means investors in commercial MBS backed by such properties are continuing to feel queasy about some of the bonds they own.

The agency MBS market continued to grow at a measured pace during the third quarter of 2017, with several key investor groups showing interest in the market, according to a new Inside MBS & ABS analysis.

The average daily trading volume in agency MBS inched up to $223.6 billion in November, the second best showing of the year, according to figures compiled by the Securities Industry and Finan-cial Markets Association. The only other month that was stronger was January at $229.8 billion.

Ginnie Mae this week announced new guidelines to curb the churning of VA loans and high MBS prepayment speeds – the first in a series of measures developed by a joint Ginnie/VA task force to address the problem.

Consumer debt reached a new high at the end of the third quarter of 2017, surpassing levels seen in the run-up to the financial crisis and prompting concerns about the systemic risk to MBS and ABS investors posed by consumer leverage.

Nonprime lenders allow credit scores as low as 500 and loan-to-value ratios up to 90.0 percent, but new originations don’t typically reach such extremes. According to an analysis by Inside Nonconforming Markets, the average credit score on loans in nonprime/Alt A mortgage-backed securities issued in recent years was 701.1. The average combined LTV ratio for the loans was 74.9 percent and the average debt-to-income ratio was 37.0 percent. The analysis ... [Includes one data chart]

The average daily trading volume in agency MBS totaled $222.5 billion in October, a slight dip from the month prior, but the third best reading of the year, according to figures compiled by the Secu-rities Industry and Financial Markets Association.

There are many unpredictable variables and economic factors outside the control of the Federal Reserve, which makes it hard to project the impact of winding down the U.S. central bank’s historic investment in agency MBS. But economic experts at Fannie Mae are cautiously expressed anticipating greater volatility, an inevitable financial shock and potential changes in the Fed’s strategy as markets evolve.

Correspondent-based lending operations are accounting for a growing share of the FHA and VA home loans pooled in Ginnie Mae mortgage-backed securities, according to a new analysis and ranking by Inside FHA/VA Lending. In fact, correspondent originations are the only production channel to see year-over-year growth in FHA and VA business through the first nine months of 2017. Retail and wholesale-broker production is down for both FHA and VA loans. Correspondent programs are most dominant in the FHA market, perhaps reflecting a preference among large producers to have recourse to a primary-market lender if the government later finds defects in how the loan was originated. Correspondents accounted for 48.7 percent of FHA loans pooled in Ginnie MBS during the first nine months of the year, up from 43.1 percent in all of 2016. Volume was up 1.7 percent from the ... [Charts]

A new net tangible benefit test for ensuring that a VA borrower benefits from a refinancing appears to be the obvious solution to the VA’s churning problem, according to analysts at Bank of America Merrill Lynch (BAML). Modeled after the FHA net tangible benefit test, the test seems to be a “foregone conclusion” for VA, analysts said. A Ginnie Mae/VA task force is currently working to resolve the problem, which is causing rapid prepayments in Ginnie mortgage-backed securities and raising serious doubts as to whether aggressive refinancing truly benefits veterans and servicemembers. “There is a critical need to ensure that veteran borrowers are not harmed by repeated refinancings through VA’s Interest Rate Reduction Refinance Loan program,” said Mortgage Bankers Association President/CEO David Stevens during a recent appearance before the House Financial Services Committee. IRRRLs, also referred to ...