The second prime non-agency mortgage-backed security from an affiliate of American International Group is a lot like the MBS the company issued in March, but the new deal received favorable treatment from the rating services, with lower credit enhancement on the senior tranche. PSMC 2018-2 Trust will be a $429.4 million issuance, according to presale reports published last week. The mortgages have an average credit score of 773, an average debt-to-income ratio of 33.0 percent ...

Flagstar Bank is set to issue a non-agency mortgage-backed security stocked solely with investment-property mortgages eligible for sale to the government-sponsored enterprises. The issuance is a first in the post-crisis era and it suggests that Flagstar expects better execution in the non-agency market than from delivering the loans to Fannie Mae or Freddie Mac. Flagstar Mortgage Trust 2018-3INV will be a $329.1 million issuance, according to presale reports published ...

A handful of nonbanks are preparing to enter the non-agency MBS market as issuers of deals backed by non-qualified mortgages. Investor demand for the products remains strong, prompting interest from new entrants.

Non-agency MBS traders defeated charges brought by the federal government in two separate cases late last week. In one case, a judge ruled that a lower court erred by admitting evidence against the trader; in the other, a jury determined that bluffing by a trader didn’t warrant a conviction.

Collateral backing prime non-agency MBS issued after the financial crisis has performed well in part because of limited risk layering, though an increase in cash-out refinance loans is a possible source of risk, said Moody’s Investors Service.

An affiliate of Western Asset Management Co. is set to issue one of the largest post-crisis non-agency mortgage-backed securities. The planned $1.25 billion issuance differs in a number of ways from deals with non-qualified mortgages from other issuers. Arroyo Mortgage Trust 2018-1 will be the first non-QM MBS from WAMC. The firm has been stockpiling non-QMs and other non-agency mortgages since the end of 2014. Loans in the pending MBS have seasoned for an average of ...

Chimera Investment issued a non-agency mortgage-backed security this week stocked with loans initially aggregated by Bank of America. The deal marked a return to the jumbo MBS market for the real estate investment trust, with officials noting strong demand from MBS investors. The $380.0 million CIM Trust 2018-J1 was largely backed by non-agency jumbo mortgages along with a 5.5 percent share of loans eligible for sale to the government-sponsored enterprises. BofA acquired ...

Spreads on mortgage-backed securities with non-qualified mortgages have tightened in recent years, according to S&P Global Ratings. “Since non-QM deals first appeared in 2014, their AAA spreads have tightened, suggesting that the market may be growing more comfortable with this asset class,” the rating service said. The spread measures the price of MBS tranches compared with a benchmark international swap rate. Tighter spreads indicate greater demand from investors ...

The retail channel is the main source of expanded-credit mortgages, followed by brokers, according to a new analysis by Inside Nonconforming Markets based on loans in non-agency mortgage-backed securities issued since 2016. Some 57.0 percent of loans in expanded-credit MBS issued in recent years were sourced through the retail channel. And 36.6 percent came through brokers. The shares are based on deals that disclose channel sourcing ... [Includes one data chart]

The share of cash-out mortgages in prime non-agency MBS has increased in recent years, prompting concerns from Moody’s Investors Service. The rating service noted that the cash-out refi share increased from around 1.0 percent in early 2012 to around 8.0 percent in the second half of 2017. The cash-out refi share has been even higher in some recent issuance. Such loans accounted for 14.9 percent of the $736.5 million deal JPMorgan Chase issued this week ...