The impairment rate on non-QM MBS increased by more than five times in April as borrowers felt the side effects of the coronavirus. The worst performing non-QM loans were those to self-employed borrowers.
Certain non-QM lenders’ underwriting tactics might not meet the CFPB’s ability-to-repay rule, according to Moody’s. It suggested tighter standards for bank statement mortgages and loans to the self-employed.
Annaly Capital Management and Ellington Financial are both generating double-digit returns from aggregating mortgages and issuing non-agency MBS. The firms plan to increase their activity in the sector.