The rating service will continue to take a relatively harsh view of mortgages underwritten with alternative documentation even though they have per-formed better than expected.
Issuance of expanded-credit MBS slowed somewhat in the second quarter but volume through the first half of the year more than doubled that seen in the first half of 2018. The sector remains hotter than the prime non-agency MBS market.
Issuance of prime non-agency MBS declined in the second quarter on a sequential basis, led by a drop in the volume of GSE-eligible loans going into the non-agency market. Only a handful of issuers were active in the second quarter.
The firm is set to issue another non-agency MBS with proprietary reverse mortgages. In a change from its previous deal, some of the loans are “inactive.”
Issuance of MBS backed by fix-and-flip loans is outpacing that of last year, though the market remains small. The largest issuer in the space received a significant investment from KKR.
The company is set to issue the first post-crisis non-agency MBS stocked entirely with home-equity lines of credit. Fitch assigned preliminary AAA ratings to the deal.
Investors in non-agency MBS face increased risks from GSE-eligible mortgages according to Moody's. The loans are allowed to have relatively high DTI ratios while still receiving QM status.
Five expanded-credit MBS deals are due at the end of the second quarter. The issuers are Ellington Financial, New Residential, Seer Capital Management and affiliates of Caliber Home and Starwood Property.
Chase and Chimera are set to issue separate non-agency MBS backed by mortgages for investment properties, following similar deals from a handful of other firms.
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