Close to $15 billion of GSE-eligible mortgages have gone into non-agency MBS this year, including many loans for investment properties and second homes. That’s expected to slow due to a removal of restrictions on the GSEs.
Some non-agency lenders are using the newer QM standards, which allow more loans to receive QM status. Others are waiting to see if the CFPB will alter the provisions.
Redwood’s already generating record volume in its lending/aggregation business, with plans to increase activity and expand its footprint. The firm might also eventually drop its real estate investment trust status.
Underwriting based on debt service coverage ratios is on the rise. The loans differ from GSE-eligible mortgages in that underwriting is based on income generated by the property rather than looking to the borrower’s DTI ratio.
Lenders can’t keep up with the demand for non-QMs from investors in the secondary market. Originations are expected to grow when the agency refi wave crashes.
A rise in interest rates near the end of March helped lift ARM originations in the second quarter. Still, the product’s market share remained well below pre-pandemic levels. (Includes data chart.)
For investors willing to shift from the agency MBS market into non-agency deals, the flow of GSE-eligible mortgages in non-agency MBS looks like a good proposition. Lenders, meanwhile, are taking a hit on pricing.
Non-QM warehouse securitization from Credit Suisse; HALO completes $450 million capital raise for rent-to-own platform; Milo launches wholesale lending for foreign national borrowers; Angel Oak restarts foreign national program; Redwood teams up with Frontiers Capital on venture investing effort.
A new expanded-credit MBS from Angelo Gordon includes loans that won’t be subject to third-party reviews until after closing. Due diligence firms are swamped due to a boom in non-agency MBS issuance.
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