Issuers of expanded-credit MBS have significantly increased deal volume this year without reducing underwriting standards in terms of traditional credit characteristics. Average credit scores for loans in the transactions have actually improved this year.
A proposal by the FDIC to decrease disclosure requirements for certain non-agency MBS issued by banks largely found support from industry participants. However, MBS investors and consumer advocates raised concerns.
Several borrowers are opting for mortgages with balances right at the conforming loan limit even though interest rates on jumbos are often lower. Relatively tight underwriting standards for jumbos look to be the cause.