Changes to underwriting standards and home price appreciation helped investors in non-agency MBS largely avoid losses during the pandemic. By comparison, cumulative losses on subprime MBS during the financial crisis of 2008 hit nearly 20%.
Issuers are still stocking non-agency MBS with GSE-eligible mortgages for investment properties. Lenders and issuers are considering their options following a suspension of limitations placed on the GSEs.
The definitions used by non-agency MBS lenders and issuers aren’t consistent and many terms haven’t been updated since 2009. The MISMO and the SFA are separately working on setting new standards.
Securitization issuers should carefully monitor and mitigate potential cyberattacks as a way to help preserve the credit quality of a structured finance transaction, S&P said in a recent report.
The Fed could end its stimulus-related purchases of agency MBS by the middle of 2022; S&P official provides an example of just how conservative rating services can be when assessing non-agency MBS and ABS.
Some of the Trump-era restrictions placed on the GSEs have been put on hold for at least a year. That includes a cap on acquisitions of mortgages for investment properties.
The SFA is working to establish a standards-setting organization that would help increase investments in non-QMs. And the association wants prime non-agency MBS to be included in any future revival of TALF.
President Biden plans to nominate Alanna McCargo to be the next president of Ginnie Mae; Credit Suisse’s warehouse lending securitization involving non-QMs upsized.
The $500 million deal allows financing of non-QMs. Moody’s placed a preliminary A1 rating on the deal, while it typically gives a AAA rating on warehouse funding securitizations that focus on GSE-eligible loans.
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