According to Kroll Bond Rating Agency, $10 billion to $20 billion of GSE-eligible mortgages for investment properties and second homes could shift into non-agency MBS due to the new restrictions.
Jumbos accounted for 9.2% of total first-lien originations in the first quarter of 2021, a slight improvement from 4Q20, but nowhere close to pre-pandemic levels. (Includes data chart.)
A reduction in GSE refi business along with regulatory changes are expected to prompt an increase in originations of non-agency mortgages. The bulk of the increase could come from prime loans.
Securitization of mortgages for investment properties increased at Fannie and Freddie in the first quarter even as overall GSE business declined. Lenders appear to have rushed to deliver the loans before new restrictions took effect. (Includes data chart.)
A number of firms are working to increase originations of non-QMs and ramping up investments in the loans. It can be a highly profitable business, though investor demand is volatile.