"Moody's data show that higher-leverage loans jumbo and conventional mortgages with debt-to-income ratios of 43.1% or higher now account for nearly 40% of new originations, up from about 20% in 2021. RMBS investors closely track delinquency rates which are expected to increase due to a weaker jobs market along with prepayment trends, when assessing risk. Amid declining rates and renewed refinancing opportunities, overall prepayments are expected to climb slightly, the analysts said."
"Moody's expects national home prices to be flat to slightly down over the next few years, following the post-2019 price boom that left many homeowners with significant equity. That equity buffer limits risk for pre-2022 RMBS. Low equity in newer loans is mainly concentrated in certain GSE and government-insured mortgages, with small shares of greater-than-80% LTVs in prime RMBS, the analysts said."
Higher-leverage jumbo and conventional mortgages with debt-to-income ratios of 43.1% or higher now comprise nearly 40% of new originations, up from about 20% in 2021. RMBS delinquency rates are expected to rise amid a weaker jobs market, increasing investor focus on prepayment trends. Declining rates and renewed refinancing will push overall prepayments slightly higher; recent vintages are more sensitive to modest rate declines while seasoned vintages with most coupons below 5% should remain slow to prepay. National home prices are forecast to be flat to slightly down, preserving equity buffers for pre-2022 RMBS. Mortgage rates are expected to stay near current levels. Potential GSE privatization and adoption of new scoring systems could affect CRT tranche credit quality, and historical data on those scoring changes is limited.
Read at www.housingwire.com
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