Higher-priced mortgages are a regulatory designation based on the comparison of the annual percentage rate on a mortgage with the average prime offer rate, which tracks rates offered to prime borrowers.
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.)