Secondary market demand, particularly from insurers, is showing mortgage originators they have a strong outlet for non-agency loan production.
Insurance companies purchased $17 billion of non-agency mortgage-backed securities in the second quarter, with the largest amount
B of A Securities also increased its non-QM issuance estimates for 2026 to $120 billion. This boosts its total outlook for the sector to $276 billion.
Through Sept. 11, this year's non-agency volume sits at $192 billion, with $83 billion worth in non-QM. The latest number makes 2026 the best year ever for non-QM, beating
In the second quarter, insurer purchases were 10% lower versus the first quarter. But the first half 2026 total of $36 billion puts the pace of activity in line with the $63 billion of RMBS they bought for all of 2025, B of A Securities noted.
Furthermore, in the second quarter, insurers purchased 23%
"In terms of net additions, we still see insurance adding across all RMBS sectors," the report said.
When it comes to whole loans, insurers bought $11 billion in the second quarter, compared with $13 billion for the prior three-month period.
This pace is "slightly below" the quarterly average during 2025, when insurance bought $59 billion of whole loans.
While the report did not name names, "at least one new insurance company purchased residential loans for the first time as of the second quarter. Another large insurance firm ramped up their total resi loan purchases to $1.6 billion for the first half of 2026 versus $100 million in 2025."
However, an insurer which is a large holder of residential mortgages reduced its purchase activity to $2 billion in the second quarter from $3.1 billion for the first three months of 2026. The reason was
"Despite the decline in activity, they remain the top two buyer of resi loans," the report said. "We also see their net resi loan holdings are flat through the first half of 2026, indicating they likely were a seller of resi assets."
In its agency weekly report, B of A Securities noted based on company filings for 966 insurance companies — 715 property and casualty, 251 life — it estimated segment MBS purchases of $24 billion in the second quarter, $5.3 billion more than in the prior three months. It is also approximately $400 million higher than the quarterly average for 2025 of $23.6 billion.
"The composition of purchases largely followed the patterns observed in previous quarters: Lifers continued to allocate heavily to extra‑long‑duration products such as CMO Z‑bonds, while P&C companies maintained a broader and more front‑loaded duration profile," the report said.
The Z-bond is the lowest ranking tranche of a collateralized mortgage obligation.
Current coupon agency MBS spreads to 5/10 year Treasuries increased in the week leading up to Sept. 10 by 3 basis points to 114 basis points, Douglas Harter of BTIG wrote in a Sept. 11 Mortgage Finance Weekly report.
"Spreads to Treasuries are currently 17 basis points below the long-term average," Harter said.
BTIG uses the spread between primary mortgage rates and current coupon MBS as the proxy for gain on sale margins.
"The primary/secondary spread was down 20 basis points this week to 76 basis points, with the primary mortgage rate increasing by 5 basis points and the secondary rate up 25 basis points," the BTIG report said. "The primary/secondary spread is 29 basis points lower than the long-term average."
Freddie Mac's Primary Mortgage Market Survey for Sept. 10 reported the 30-year fixed rate loan
Lender Price data on the National Mortgage News website, as well as anecdotal reports from last week, put the 30-year FRM over 7%.
