The rating service’s proposal regarding the treatment of private mortgage insurance on GSE risk-sharing transactions and non-agency MBS prompted some concerns from industry participants.
Any removal or adjustment to the QM patch that results in additional non-agency loan volume will benefit mortgage REITs in terms of originations and investments, according to analysts.
PIMCO is set to issue a non-agency MBS with loans sourced from non-QM deals issued by Lone Star Funds. The older MBS were subject to clean-up calls, allowing PIMCO to re-package the loans.
Rep. French Hill, R-AR, wants the QM patch to expire as well. “Allowing Fannie and Freddie to continue loading up on high-debt mortgages because of a temporary loophole has had a harmful effect on the broader housing market,” he said.
Fannie/Freddie "noncore" loans include conforming jumbos, mortgages with debt-to-income ratios greater than 43%, investor loans/second properties and cash-out refinances...
The proposal to end the qualified mortgage patch available to loans eligible for sale to the GSEs could boost non-agency mortgage activity, though the devil is in the details as the plan plays out leading to early 2021.