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

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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.

"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