Sprout originated about half of the loans in a new $293.5 million expanded-credit MBS from an affiliate of Lone Star Funds. Fitch Ratings assessed the deal and suggested that risks tied to Sprout were limited.

Non-QMs are a double-edged sword for lenders, offering attractive margins along with extreme volatility risk. Industry analysts suggest demand for the loans in the secondary market will recover when lenders start selling mortgages with higher interest rates.

Expanded-credit MBS have been few and far between in July while non-agency MBS issuers have yet to offer a prime deal during the month.

Two prominent non-QM lenders ceased operations in the past two weeks amid weak demand for the loans. Still, other market participants are stressing that they remain in strong operating positions.

Shortly after lenders adjusted to QM standards set in December 2020, the CFPB is initiating a review of the standards. Significant changes appear unlikely, though the seasoned QM option could be eliminated.

PRP Advisors issued its first non-agency MBS with newly originated mortgages for investment properties. To this point, Balbec’s non-agency MBS issuance has focused on seasoned mortgages.

Are secondary market non-QM buyers getting choosier about the paper they buy in a rising interest rate environment? In some cases, the answer is yes. Then again, who can blame them.

Turmoil in the secondary market regarding prices paid for expanded-credit loans may be feeding job cuts at Sprout Mortgage. It’s hard to say, though. The New York-based company is keeping a low profile.

FoA, which has been creeping into the expanded-credit sector in recent years, including fix-and-flip loans, is looking for a new CEO. The company became a public entity roughly 15 months ago.

The California bank joins the growing ranks of lenders offering innovative home-equity products to help borrowers counter rising interest rates.