RMBS: Growth in non-QM issuance, drop in refi activity in 2020
admin | January 10, 2020
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Overall residential mortgage originations are projected to fall to $1.9 trillion in 2020, after exceeding $2 trillion in 2019. The combination of still low interest rates and slower home price appreciation should improve affordability, lifting purchase originations by 2.6% to $1.3 trillion, while refinance originations could drop by nearly 25% to $600 billion. Non-agency RMBS issuance grew 30% year-over-year in 2019 to $124 billion, led by a jump in non-QM issuance to $25 billion. Non-QM issuance is expected to grow to $35 billion in 2020, pushing the overall non-agency sector to $130 billion, as non-performing/re-performing loan securitizations decline. Some of the lift will likely come from a rise in jumbo prime loans as more agency-eligible borrowers migrate to interest-only loans. Underlying market strength is new household formation among the millennial generation and an unemployment rate near a 50-year low, both of which should contribute to strong performance. The S&P Global Structured Finance Outlook 2020 is here (subscription required). (S&P, APS)
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