Fitch

Rating agencies are sparring over a new feature in a private-label RMBS that upends the relationship between senior and sub bondholders.

The rating agency feels that “late-cycle credit behavior” is allowing less established issuers to rely on the securitization market more heavily for funding.

Wells Fargo’s first private-label mortgage securitization since the financial crisis doesn’t break any new ground — and that’s probably the point.

Commercial mortgage-backed securities delinquency rates are likely to continue to decrease for the rest of the year, as new issuances outpace maturing loans and precrisis loans continued to get resolved by special servicers, Fitch Ratings said.

The deal, which Fitch did not name in its report, appears to be VCO CLO 2018-1. The agency said the transaction might not even merit a single-A rating, given the high single-sector concentration.

Intensifying margin pressure could spur another wave of cost-cutting at nonbank mortgage lenders, unless other strategies, like consolidation or a mortgage servicing book that could increase in value, offset it.

Nonbank mortgage-backed securities servicers increase their exposure to agency loans as the housing market distances itself from last decade's crash, according to Fitch Ratings.

Frameworks have largely improved since the financial crisis, but there remains a lack of consistency and some recurring weaknesses that are keeping some traditional U.S. RMBS investors on the sidelines.

The ratings agency cautions that marketplace lenders' efforts to tighten credit standards during a "solid" macroeconomic environment underscore the volatility their portfolios might face in a downturn.

The future secondary mortgage market entities will receive high investment grade ratings, even as there is no clarity on their scope or form, Fitch Ratings said.