It’s not every day that bond-investing giant PIMCO pulls out of a market, but for now the whole-loan buyer is avoiding non-QMs. Also, part of the story: the closures of FGMC, Maverick and Sprout Mortgage.
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.
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