Thanks to economic damage caused by the coronavirus, the non-QM market is in tatters. Yet, opportunity abounds in the junk heap. Will Citadel become a specialty/subservicer?
Velocity Financial raised capital by selling stock after plans to issue MBS were disrupted by volatility from the coronavirus. Several REITs also provided updates on their financials.
AG Mortgage Investment Trust filed a lawsuit to stop Royal Bank of Canada from selling commercial MBS the company is a counterparty to. The bank for now has decided to postpone the auction.
The Fed is taking steps to boost the market for agency MBS and certain sectors of the ABS market, while non-agency MBS isn't receiving direct relief. The Structured Finance Association called for an expansion of the new TALF.
Investor demand for non-QMs plummeted in recent weeks due to fallout from the coronavirus. Some non-QM lenders have stopped originating loans and others are repricing their products.
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.
A longer statute of limitation and increased disclosure requirements could help attract long-term investors in the MBS and ABS market, industry experts recommend.
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