A market maker in non-agency jumbos, Wells Fargo has reopened its cash window, at least by a crack or two.

Originators of non-qualified mortgages are selling product in smaller batches and as whole loans. The reason: better execution than delivering them into MBS.

Angel Oak, a big player in the non-QM market, sees better days ahead, with securitzations leading the way. Fundings at the firm are nearing pre-pandemic levels.

Issuers of expanded-credit MBS haven’t been able to stock deals with new production while one of the largest post-2010 prime non-agency MBS hit the market this week.

Issuance of prime jumbo non-agency MBS was up in 2020 despite a soft fourth quarter, but the expanded-credit mortgage sector lagged, as did securitization of reperforming loans. (Includes three data charts.)

Three new non-agency MBS were introduced in the market recently. Two of the deals are backed by mortgages for investment properties.

Securitization of non-qualified mortgages is generating healthy profits. However, issuers face a dilemma: Originations of the product have slowed.

Issuers of prime non-agency MBS are completing deals with mortgages originated after the market volatility of March while expanded-credit MBS continue to be stocked with older loans.

Demand for non-QM MBS has returned to pre-pandemic levels even though the deals include a significant amount of loans in forbearance and fewer protections for investors.

Following in the footsteps of Citi and JPMorgan Chase, Wells Fargo is preparing to issue a non-qualified mortgage MBS. The bank plans to securitize small pools of its non-agency originations on a regular basis.