Expanded-credit MBS issuance looks likely to increase again in 2020, but not at the exponential growth rate seen since the sector emerged in 2015. A major variable is how the CFPB will address the QM patch.
Competition for non-QMs is fierce among aggregators in the secondary market. The loans offer strong returns when held in portfolio or when packaged into MBS. However, some investors believe the bids are getting overheated.
A busy market: An affiliate of Neuberger Berman is prepping a $411.1 million expanded-credit MBS; Credit Suisse increased the number of lenders it's sourcing non-QMs from; and an affiliate of PIMCO issued another deal with seasoned non-QMs that were subject to clean-up calls.
Originations of non-QMs and other expanded-credit products increased in the third quarter though not as quickly as total first-lien originations, which were boosted by refi business. (Includes data chart.)
Impac is making some changes aimed at increasing originations of non-QMs after focusing on GSE refis in 3Q19. The lender’s profitability took a hit as GSE mortgages offer lower margins than non-QMs.
It’s still not clear how the CFPB will address the patch for qualified mortgages, prompting speculation among participants in the non-QM market. The bureau has the issue listed on its December agenda.
One of the most common types of non-qualified mortgages is a loan for self-employed borrowers underwritten with bank statements. Borrowers often opt for a non-QM rather than re-file taxes.
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