Originations of non-agency jumbo mortgages increased in the second quarter, spurred by low interest rates. The sector gained market share and some lenders said pipelines were strong heading into 3Q19.
Quicken increased its contributions to prime non-agency MBS this year, including $619 million of loans going into deals issued in the second quarter. Characteristics of the deals were largely unchanged.
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Redwood’s margins from non-agency mortgage activity declined in the second quarter and aren’t expected to increase much for the rest of the year, according to officials at the REIT. Redwood also has changed its MBS issuance strategy, putting seasoned mortgages into deals.
JPMorgan Chase is increasing its issuance of jumbo MBS backed by loans with relatively high LTV ratios. Meanwhile, Flagstar Bank is contributing loans to a jumbo MBS from Goldman Sachs.
The correspondent share of jumbo originations declined in the first quarter of 2019 after reaching relatively high levels in the second half of 2018. The retail channel remained the main source of production while brokers gained market share.
The trade group is urging the CFPB to allow jumbos to receive qualified mortgage status even if the loans have debt-to-income ratios greater than 43%. The pending expiration of the QM patch has also prompted a back-and-forth among think tanks.
Originations of non-agency jumbo mortgages declined by 1.5% in the first quarter though the sector gained some market share as total first-lien originations fell by an even greater amount.
Issuance of prime non-agency MBS has slowed significantly. A pending deal from Wells Fargo is only the second issuance of 2Q19, though industry participants suggest that demand from investors is increasing.
Issuance of expanded-credit mortgage-backed securities hit $5.97 billion in the first quarter of 2019, a record for the sector. It also topped prime non-agency MBS volume for the third consecutive quarter.
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