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Private-label RMBS on track to surge again in 2019: Bank of America

Although forecasts anticipate a continuing drop in overall originations, private-label residential mortgage-backed securitizations backed by newer loans are expected to keep increasing through next year, according to Bank of America.

"We hold a positive outlook for RMBS issuance next year despite our expectation for a continued slowdown in U.S. home price appreciation and mortgage origination volume," researchers at the bank said in a recent report.

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"Our positive issuance outlook for RMBS therefore reflects the fact that we expect PLS to increase its market share next year (as has happened in 2018)," they added.

Although 51% of the PL RMBS market remains largely comprised of securitized legacy product, the share of issuance backed by new loans is growing. These include securitizations of post-crisis jumbos and loans made outside the parameters of the Qualified Mortgage safe harbor from ability-to-repay liability.

If jumbo 2.0 securitizations keep running at their current rate, they will total $24 billion this year and 20% of the private-label RMBS market. Non-QM issuance is expected to total $9 billion, according to Bank of America.

Next year, post-crisis jumbo RMBS issuance is expected to rise to $35 billion in 2019, fueled in part by the entry of new issuers like Wells Fargo and LoanDepot as the private-label execution for loans has become more competitive.

New issuers are also expected to help fuel a rise in non-QM issuance to $14 billion in 2019. Issuers that have entered that market recently have included Starwood, Fortress, and Neuberger Berman. Longer-term issuers like Angel Oak also have noted that their volumes have been growing.

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RMBS Private-label Jumbo mortgages ATR Qualified Mortgages Home prices Originations Bank of America
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