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.
The notion that the single-family rental market can flourish whether the housing market is hot or struggling is being put to the test. Kroll Bond Rating Agency cautioned that upgrades of SFR securitizations will be limited in the near term.
KBRA said that third-quarter MBS issuance volume didn’t meet its expectations and will drop rapidly in the coming year. Meanwhile, both DBRS and Moody’s noted that performance is stabilizing.
Declining home prices have MBS investors worried about potential losses and downgrades. Officials from rating services said their assessments include significant stresses.
Delinquencies on expanded-credit MBS are increasing but investors in the deals appear to be protected at the moment. A review of the sector by Fitch prompted many upgrades and no downgrades.
Angel Oak Capital Advisors and a portfolio manager with the company settled with the SEC, which alleged improper reporting of delinquencies on a fix-and-flip securitization issued by Angel Oak in 2018.
MBS and ABS tied to floating-rate assets could see rising delinquencies as interest rates increase. Inflation also remains a concern, though Fitch and Moody’s suggest that most deals can weather the storm.
Borrowers with loans in various types of MBS and ABS could be stretched as interest rates increase, according to industry analysts. Prepayment rates are also likely to slow.
Congress is getting closer to passing legislation that would help legacy MBS and ABS transition away from LIBOR; there’s a securitization angle in Zillow’s move to discontinue its fix-and-flip business.