Hoping to buy non-QMs on the cheap for an upcoming securitization? Forget it. The bargains are all gone. The good news: New lending is increasing from severely muted levels.

The real estate investment trust is ready to take non-agency loan aggregation to pre-crisis levels, and believes investors are seeking the types of assets the company offers.

Even though a sizable portion of mortgages originated earlier in the year are in forbearance, investor demand for MBS backed by those loans is strong.

In the first half of 2020, Freddie priced 28 deals totaling $20.73 billion. So far in the third quarter, it has already brought 10 and has 13 transactions on its calendar through September.

Investor demand for non-QM MBS is currently near levels seen before volatility in March, helping to sustain issuance volume. The deal flow could slow soon due to limited originations and economic trends.

The deal comprises fully collateralized excess-of-loss reinsurance coverage for MI policies written from July 2019 through March 2020.

Securitization of expanded-credit mortgages was the only non-agency sector to see increased issuance during the tumultuous second quarter of 2020. Jumbo and scratch-and-dent production fell sharply from the first quarter. (Includes two data charts.)

Rating services are requiring higher credit enhancement levels and taking negative actions on outstanding deals due to problems stemming from the coronavirus. Fitch finalized new criteria for residential MBS late last week.

Demand for non-agency MBS has increased significantly in recent weeks after investors fled the market in late March and April. Issuance has been driven by somewhat seasoned non-qualified mortgages.

Arbor Realty Trust issued a $727.2 million non-agency multifamily MBS. For the most part, these deals are uncommon because the GSEs dominate the market.