According to a report by the Kroll Bond Rating Agency, this year could be the biggest for non-agency mortgage-backed securitisations since the real estate crash of the Great Recession brought that market to a standstill.
With an estimated $ 29 billion for the third quarter added to about $ 43 billion in the first half, annual emission is able to hit its previous post-crisis high that set at around $ 60 billion in 2019 was easily surpassed. While the current forecast of 96 billion
It also marks a turnaround at a time during the 2020 pandemic when some companies were pulling out of this market. Additionally, this begs the question of how lenders' interest in a wider range of mortgages could fuel growth.
However, since some of the increase in volume is due to loans brought to market through product restrictions that expose two large government loan buyers, it could hurt future market growth.
KBRA has included in its estimate of the volume for 2021 the issuance of credit risk transfers, which the two state-sponsored companies are selling to investors in the private market. But even without the CRT, the forecast for 2021 would still be record breaking and would be well over 80 billion US dollars. CRT could be more influential in the fourth quarter as regulatory restrictions on it are lifted.
The main reason for private securitization continues to be larger loans extended outside the compliant limits of the two GSEs to borrowers with strong credit profiles. KBRA's forecast suggests that roughly $ 60 billion of the 2021 volume will come from this prime jumbo sector, but also that the volume from the non-prime market could be a bit larger this year.
As it grows, nonprime securitized lending to borrowers with lower credit scores or who otherwise do not qualify for compliant or government lending is still a relatively small portion of the private marketplace. Additionally, this segment is now regulated by repayment capability requirements that weren't in place when looser subprime lending helped crash the Great Recession.