Sponsors of non-agency mortgage-backed securities have been busy of late. One goal is to clear out older, lower-yielding paper. At least two recent deals fit the bill and more could be on the way.
The REIT has built up strong residential and MSR businesses to diversify risk and support its agency prowess. And while it’s held back on increasing leverage, once volatility declines, all that may change.
Non-QM lending may sound good to conventional originators looking to bolster their menus, but headwinds are still evident. Low-yielding paper still needs to be moved but financiers and acquirers are having second thoughts.
Moody’s proposed establishing ESG “issuer profile scores” and “credit impact scores” for structured finance transactions rated by the firm. DBRS, too, has released its approach to ESG risk factors in credit ratings.
Non-QM rates are now north of 7% in many cases, but the market is still dealing with upwards of $5 billion in lower-coupon product that needs to be moved.
Non-agency MBS with mortgages originated by CDFIs faces scrutiny from rating services; The Change Company pushes back; MBS and ABS investor preferences on credit scoring models.
Issuance of expanded-credit MBS flowed in the first half of the year even as lenders grappled with higher interest rates. Issuance is expected to slow as lenders work to establish a new supply of loans with higher interest rates.
Portfolio holdings of agency MBS fell mostly due to lower market value for the assets. REITs also recorded a significant drop in TBA investments as agency MBS issuance declined. (Includes data chart.)
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