Why Lenders Might Be Slower To Lend To First Time Patrons

Analysts reiterate concerns about the financial strain on the government mortgage market, which serves low-income, entry-level buyers who have been slow to expand their credit as economic conditions improved.

Analysts at the Kroll Bond Rating Agency on Thursday recorded some uncertainty surrounding non-bank companies that have suspended or withdrawn payments on loans in Ginnie Mae securitisations.

Loans in Ginnie Mae securitisations have had the highest percentage of forbearance relatively consistently since the CARES law went into effect last spring. The Mortgage Bankers Association's May 10 Forbearance Report found that Ginnie Mae's forbearance loan amount fell 20 points to 5.82% week after week. That compared to a 2.32% share for Fannie Mae and Freddie Mac, which were down 10 points from the previous week.

In a report that assigned non-banks a "lower quality rating than other financial sectors such as deposit-borne commercial banks," KBRA analysts also found the issue to be a particular problem for the Ginnie Mae sector. The non-custodial portion of Ginnie Mae securitized lending is greater than other sectors of the mortgage market.

As a result, KBRA analysts are beginning to differentiate their outlook for companies based on Ginnie Mae and non-bank exposures.

While the ginnie market is lagging behind other sectors of the market, while it is in better shape than it was without public support, the government agency overseeing it has taken steps to monitor and mitigate non-custodian risk.

While Ginnie Mae's issuance fluctuated a bit, it rose from nearly $ 82.3 billion in March to another record high of nearly $ 89.7 billion in April. A year ago in April, Ginnie Mae's issuance was only $ 63.8 billion.

KBRA analysts reiterated other reports that while concerns about non-bank credit risk existed, these were less of a concern than during the Great Recession, as underwriting was relatively tight and property values ​​rose.

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