The thirst for non-QM paper continues to be rad hot, thanks, in part, to investors’ desire for yield. It comes down to this: a 5% non-QM, though comparatively risky, is better than a 10-year Treasury yielding 95 basis points.
Performance on non-agency MBS has improved after the spike in late payments seen in the spring. However, borrowers who are still delinquent could prompt losses for investors.
The FHFA’s capital requirements include relatively harsh treatment of credit-risk transfer transactions from Fannie and Freddie but that view could change under the Biden administration.
Regulatory reforms initiated after the 2008 financial crisis seemed to work as intended during the COVID-19 downturn, according to participants at the ABS East conference.
Originations of expanded-credit mortgages increased by 2.5% in the third quarter on a sequential basis. But the sector lost market share as lenders continued to focus on GSE refis. (Includes data chart.)