The first non-agency MBS issued by a Community Development Financial Institution includes loans that didn’t require verification of borrower income or employment.
Mortgages in the transaction were acquired by Western Alliance Bank on a correspondent basis and will remain on its balance sheet. Risk-sharing deals in the non-agency market are rare and largely involve megabanks.
Prospects for non-agency MBS issuance in 2022 look mixed, with expanded-credit activity expected to increase while volume involving non-agency jumbos and GSE-eligible loans could decline.
Non-agency MBS issuers are off to a fast start this year, with four deals marketing this week. The MBS are backed by non-agency jumbos and GSE-eligible mortgages for investment properties.
In a familiar refrain, participants in the non-QM market suggest the sector is ready for takeoff. Still, technology in the non-QM market lags compared with the GSEs.
Issuers of prime non-agency MBS are increasingly removing loans subject to third-party due diligence reviews from the final MBS pools. Kroll Bond Rating Agency said the practice is a slippery slope.
The Structured Finance Association has developed a framework due diligence providers can use to help gauge QM compliance. A large chunk of the document focuses on verification of a borrower’s employment.
Non-agency MBS brought to the market in the past two weeks were primarily stocked with jumbo mortgages and GSE-eligible loans for investment properties. There were also a few expanded-credit deals.
MFA Financial posted a sharp increase in income, driven by its focus on buying non-agency mortgages and its acquisition of Lima One, a business-purpose lender.
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