Losses on non-agency MBS, a rarity for deals issued since 2010, look likely as forbearance plans for distressed borrowers end. Investors in the senior tranches appear to be safe for now.
Loans backing securitized products are holding up fairly well even though the use of forbearance has increased. A combination of investor protections and changes in underwriting practices is helping.
There’s a lack of standardization among non-agency MBS servicers regarding reporting of loans in forbearance. Investors are having difficulties understanding what exactly servicers are doing.
Issuance of non-agency MBS and ABS is still being completed, but at a slower pace. Spreads have widened for new deals along with trading in the secondary market.
The overall mortgage securitization rate fell slightly in 2018, with 70.0% of home loans originated in the primary market ending up in MBS pools, according to an Inside MBS & ABS analysis. [Includes one data chart.]