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Inside Nonconforming Markets

May 4, 2018

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Jumbo Production Declines in 1Q18 at Handful of Banks, Optimism for Spring

Originations of non-agency jumbo mortgages declined in the first quarter of 2018 at a number of banks that provide early disclosures about their business. Officials cited seasonal factors for the lower volume and suggested that production will bounce back in the second quarter. First Republic Bank, the largest of the four banks in terms of jumbo production, had $2.33 billion in total originations in the first quarter. Jumbos tend to account for more than 90.0 percent of its total production ... Read More

Western Asset Management Brings Non-QM MBS

An affiliate of Western Asset Management Co. is set to issue one of the largest post-crisis non-agency mortgage-backed securities. The planned $1.25 billion issuance differs in a number of ways from deals with non-qualified mortgages from other issuers. Arroyo Mortgage Trust 2018-1 will be the first non-QM MBS from WAMC. The firm has been stockpiling non-QMs and other non-agency mortgages since the end of 2014. Loans in the pending MBS have seasoned for an average of ... Read More

Chimera Packages BofA Loans into MBS

Chimera Investment issued a non-agency mortgage-backed security this week stocked with loans initially aggregated by Bank of America. The deal marked a return to the jumbo MBS market for the real estate investment trust, with officials noting strong demand from MBS investors. The $380.0 million CIM Trust 2018-J1 was largely backed by non-agency jumbo mortgages along with a 5.5 percent share of loans eligible for sale to the government-sponsored enterprises. BofA acquired ... Read More

MBS Investors Gaining Comfort with Non-QMs

Spreads on mortgage-backed securities with non-qualified mortgages have tightened in recent years, according to S&P Global Ratings. “Since non-QM deals first appeared in 2014, their AAA spreads have tightened, suggesting that the market may be growing more comfortable with this asset class,” the rating service said. The spread measures the price of MBS tranches compared with a benchmark international swap rate. Tighter spreads indicate greater demand from investors ... Read More

Retail, Brokers Dominate Expanded-Credit Lending

The retail channel is the main source of expanded-credit mortgages, followed by brokers, according to a new analysis by Inside Nonconforming Markets based on loans in non-agency mortgage-backed securities issued since 2016. Some 57.0 percent of loans in expanded-credit MBS issued in recent years were sourced through the retail channel. And 36.6 percent came through brokers. The shares are based on deals that disclose channel sourcing ... [Includes one data chart] Read More

Cash-Out Refi Share of Prime MBS Increasing

The share of cash-out mortgages in prime non-agency MBS has increased in recent years, prompting concerns from Moody’s Investors Service. The rating service noted that the cash-out refi share increased from around 1.0 percent in early 2012 to around 8.0 percent in the second half of 2017. The cash-out refi share has been even higher in some recent issuance. Such loans accounted for 14.9 percent of the $736.5 million deal JPMorgan Chase issued this week ... Read More

Redwood Buys Stake in SFR Lender

Redwood Trust entered the single-family rental market this week by purchasing a stake in 5 Arches, a lender and asset manager. The move is part of a diversification strategy for Redwood, with officials at the real estate investment trust expecting growth among renters. Redwood acquired a 20.0 percent interest in 5 Arches with a one-year option to purchase the remaining 80 percent of the company. Redwood paid $10.0 million in cash for the minority stake and can buy the rest of the ... Read More

News Briefs

PennyMac Financial Services re-started its jumbo mortgage origination operations in the first quarter with plans to return as an issuer of jumbo mortgage-backed securities. The nonbank locked $21.0 million in jumbo production as of the end of March. Ocwen Financial reported net income of $2.6 million for the first quarter of 2018, putting a halt to an extended streak of quarterly losses. Ocwen is the largest subprime mortgage servicer, by far, and the firm ... [Includes three briefs] Read More

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