After a brief rebound in the first quarter, issuance of non-agency MBS declined in the most recent three-month period despite a tiny increase in prime deals.

Issuers of non-agency MBS need to do more to help attract investors to the sector, according to industry participants.

Spreads on new non-agency MBS issuance are tightening. Still, issuance is expected to decline on an annual basis.

At one point, First Republic Bank was a major contributor to non-agency MBS. In recent years, the bank retained its production, though JPMorgan Chase could move to sell the loans.

Issuance of all the major RMBS products rose significantly in the first quarter of 2023, although average seasoning in the deals was higher. Subordination levels in ECM deals rose as investor demand weakened and collateral trended riskier. (Includes three data charts.)

Volatility stemming from bank failures in March put a damper on non-agency MBS issuance. A jumbo deal was pulled and expanded-credit activity slowed.

FDIC monitoring commercial MBS performance; MISMO to update ASF data standards; ACC subprime auto ABS servicing update.

Prime jumbos are unlikely to account for the majority of non-agency MBS issued this year, a first for the products since the time before the financial crisis. Non-QM MBS issuance is holding up better and second-lien securitizations are building some momentum.

AB CarVal Investors and Ares Management are in the market with separate expanded-credit MBS, marking the first time either firm has offered that type of MBS.

Redwood Trust isn’t planning to ramp up acquisitions and sales of prime non-agency mortgages in the near term due to elevated interest rates and strong competition from banks for jumbos.