There’s a lack of standardization among non-agency MBS servicers regarding reporting of loans in forbearance. Investors are having difficulties understanding what exactly servicers are doing.
Rating services are requiring higher credit enhancement levels and taking negative actions on outstanding deals due to problems stemming from the coronavirus. Fitch finalized new criteria for residential MBS late last week.
Non-agency mortgages aren’t covered under the CARES Act, leaving servicers of such loans to rely on a combination of standards set by the GSEs and individual MBS contracts.
Underwriting standards on jumbo mortgages tightened in March and April amid volatility from the coronavirus. The spread on interest rates for jumbo mortgages is also wider than it was before March.