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.

A leadership shuffle at the Fannie/Freddie joint venture ends rumors that its securitization platform would be opened to competing guarantors.

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.

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.