Issuance of prime non-agency MBS more than doubled in the third quarter. Thanks to new production, expanded-credit MBS remained the top source of non-agency MBS, though issuance is slowing. (Includes data chart.)
The Financial Stability Oversight Council’s review of the secondary mortgage market focused solely on the GSEs. Bottom line: Regulators endorsed con-servative capital requirements recently unveiled by the FHFA.
Some 19.2% of non-QMs in MBS were modified or delinquent as of the end of August, down 70 basis points from July. Loan performance improved even as enhanced unemployment benefits expired.
While lenders like the CFPB’s proposal to provide QM status to certain non-QMs if the loans perform well for the first three years after origination, con-sumer advocates warned of reduced protections for borrowers.
The CFPB’s proposal could drastically reduce the number of non-QMs originated while helping the non-agency market compete with the GSEs. Industry groups and consumer advocates endorse the tradeoff.
Wells Fargo is set to issue its first expanded-credit MBS. Loans in the deal have seasoned for an average of 15 months and other issuers are prepping MBS with somewhat seasoned mortgages.
The impairment rate on non-QM MBS declined to 19.3% in July from 20.4% in June. While loan performance is improving, MBS investors could suffer reduced cash flows and losses as modifications end.
The majority of loans in Goldman's MBS were included in deals issued in 2017 and 2018 that were subsequently collapsed. Angel Oak, Chase and MFA also issued MBS within the past two weeks.
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