Spreads on jumbo MBS widened in recent months as the supply of prime non-agency MBS surged. Redwood Trust opted for more whole-loan sales during the third quarter while JPMorgan Chase remained an active MBS issuer.
While caps on GSE acquisitions of loans for investment properties were suspended mid-September, non-agency issuers continue to package the loans in their MBS. Three firms entered the sector during October.
The non-agency securitization business is hot but maybe it’s too hot? Some market participants contend issuing banks are eyeing the rating services for talent.
Changes implemented in response to the financial crisis of 2008 helped the MBS and ABS markets perform better than expected at the onset of the pandemic.
Structured finance production held at historically high levels in the third quarter, though most sectors were down. Growth pockets included non-agency MBS and ABS. (Includes four data charts.)
Attendance was down at the recent Structured Finance Association convention in Las Vegas. Discussions touched on the non-agency MBS market and the GSEs, among other issues.
The difference between interest rates on non-QMs in MBS and the interest rate paid to investors in the securities is helping to protect investors from losses. Excess spread in the sector increased as seasoned loans were repackaged.
MBS and ABS face multiple physical and transition risks from climate change over the short, medium and long term, said panelists at the annual Structured Finance Association conference.
A handful of MBS and ABS have incorporated blockchain in a limited fashion. Proponents of the technology suggest that it will improve efficiencies and decrease costs.
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