As borrowers in prime non-agency MBS transition out of forbearance plans, investors in the deals could experience reduced cashflows due to interest shortfalls.
Various announcements by Ginnie, FHFA and the GSEs helped investors in MSRs get more comfortable in recent months. Meanwhile, use of Ginnie’s PTAP financing option remains minimal.
The flow market for MSR sales is returning to normal after COVID-related volatility in March and April caused demand for MSRs to wane. Traditional sellers of MSRs retained servicing this summer, helped by profits from the refi business.
While the share of loans in forbearance continues to decline, the borrowers who remain in relief could be more difficult to help, according to industry analysts.
This summer, non-cash-flowing loans as a share of aggregate current balance of non-agency MBS ranged from around 5% of post-2010 prime non-agency MBS to as high as 26% for legacy deals...