Non-agency loans account for about 30% of all residential mortgages outstanding and, unlike with servicing for the GSEs or government-insured mortgages, there’s no standardization in how servicers will respond to borrowers facing financial difficulties tied to the coronavirus.
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Mortgage-related real estate investment trusts, including Redwood, have been hit hard by a wave of margin calls due to drastic declines in the value of their MBS. Redwood said it has met its margin calls so far.
AG Mortgage Investment Trust filed a lawsuit to stop Royal Bank of Canada from selling commercial MBS the company is a counterparty to. The bank for now has decided to postpone the auction.
During the 2008 financial crisis, investors in non-agency MBS sought repurchases from issuers, citing faulty underwriting and disclosures. A similar surge in putbacks could be on the way for the auto ABS market.
Angel Oak Mortgage Solutions laid off roughly 70% of its 275 employees as non-QM originations have stalled due to economic fallout caused by the coronavirus.