Issuance of expanded-credit MBS is set for a strong start in the third quarter. Presale reports for eight deals were published in the past two weeks, including the second-largest post-crisis issuance.
Average credit scores, DTI ratios and LTV ratios are staying relatively steady as expanded-credit MBS issuance booms. Lenders are putting more emphasis on underwriting based on alternative documentation.
The rating service will continue to take a relatively harsh view of mortgages underwritten with alternative documentation even though they have per-formed better than expected.
Issuance of expanded-credit MBS slowed somewhat in the second quarter but volume through the first half of the year more than doubled that seen in the first half of 2018. The sector remains hotter than the prime non-agency MBS market.
Varde agreed to sell non-QM lender Deephaven to Pretium, an investment manager involved in single-family rentals along with mortgage credit. Transaction details weren't disclosed.
The latest expanded-credit MBS from Angel Oak will be somewhat smaller than the first two deals the firm issued this year. The deal also includes a higher share of mortgages underwritten with 12 months of bank statements.
Participants in the non-agency market are looking forward to the end of the “GSE patch,” anticipating significant increases in non-QM activity as long as federal regulators provide certainty regarding the rules of the road.
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