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.

AG Mortgage Investment Trust more than doubled its net income in the third quarter as it shifted its focus to non-agency mortgages. AGMIT is sourcing many of its mortgage acquisitions from an affiliated lender.

The public REIT portion of the Angel Oak Companies non-QM machine nearly tripled its income in the third quarter thanks to an increase in loan acquisitions and an MBS issuance.