RMBS: Growth in non-QM issuance, drop in refi activity in 2020
admin | January 10, 2020
This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.
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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