The non-QM market is poised for a comeback, helped by strong demand from investors in the secondary market. However, production is lagging as lenders continue to focus on agency refis.
First Republic Bank reported increased production in the fourth quarter and for full year. Volume was down on an annual basis at Flagstar Bank and Redwood Trust.
It’s taking longer to originate non-qualified mortgages and offload the product due to capacity constraints at due diligence providers and other third-party vendors.
A significant portion of non-QMs could meet new standards for qualified mortgages, according to Kroll Bond Rating Agency. It’s also possible that the CFPB will alter the standards before they take effect.
Chase is set to issue a $1.03 billion MBS backed by newly originated jumbos. Meanwhile, Credit Suisse and MFA have deals with slightly seasoned non-QMs and investment-property loans.
The latest changes made to the GSEs’ preferred stock purchase agreement place limits on certain loan acquisitions by Fannie and Freddie. However, the move is unlikely to help the non-agency market.
Strong application volume for non-QMs at PCMA; increased funding for investment-property mortgages; CFPB exempts smaller depository institutions from escrow requirements for higher-priced mortgages.
Originators of non-qualified mortgages are selling product in smaller batches and as whole loans. The reason: better execution than delivering them into MBS.
Volatility in the secondary market for non-QMs receded within two months but originations are still nowhere near pre-pandemic levels. Reason: lenders focusing on agency refis.