After the transaction closes, business-purpose lending investments will account for more than 15% of Redwood's investment portfolio, up from a 4% share.
The new MBS differs in some ways from previous expanded-credit issuance from Annaly, including a reduced reliance on mortgages from Banc of California and an increase in investment-property loans.
Issuance of expanded-credit MBS more than doubled on an annual basis at the end of the third quarter while deals backed by prime mortgages and GSE-eligible loans declined. The expanded-credit sector is expected to continue to grow, according to industry analysts. (Includes data chart.)
JPMorgan Chase Bank has created a synthetic credit-linked note to transfer credit risk on a pool of jumbo mortgages. Unlike traditional MBS, loans in the transaction will remain on the bank’s balance sheet.
Originations of higher-priced non-government mortgages increased by 11% in 2018. The loans can’t receive safe harbor QM status and many higher-priced mortgages are required to include escrow accounts. (Includes two data charts.)
Issuance of non-agency MBS slowed near the end of the third quarter but presale reports for a number of deals have been published this month and more securities are on the way.
Originations of reverse mortgages are dominated by FHA loans. However, there’s a loan limit on FHA loans, allowing Reverse Mortgage Funding and other lenders to develop a market for proprietary products.
The CFPB is considering whether to provide QM status to mortgages that didn’t miss payments in the early years after origination. The proposal has support from some lenders.