The expanded-credit sector lost market share in 2019 as lower interest rates helped propel refinances of conforming mortgages. Citi was the top lender in the space. (Includes data chart.)
Presale reports for three deals backed by new originations were published this week. However, there’s uncertainty about how they will be received by investors due to market volatility related to the coronavirus.
Investors that are active in the market for non-QMs can’t seem to get enough of the loans or MBS. Meanwhile, large firms continue to avoid the sector due to concerns about liabilities and the lack of uniformity.
Despite regulatory talk about increasing efforts to help the non-agency market compete with the GSEs, the volume of noncore loans sold to Fannie and Freddie increased in 2019, led by mortgages with DTIs greater than 43%. (Includes data chart.)
CFPB Director Kathy Kraninger says the relatively small size of the non-qualified-mortgage market is one of the reasons the bureau plans to change QM standards.
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.