Private-label RMBS on track to set a new post-crisis record
The dollar volume of private-label residential mortgage-backed securities issuance this year is the highest it has been since the Great Recession, despite a decline in new originations.
"Combined 2018 issuance activity in the prime and nonprime RMBS sectors is on pace to more than double the previous highest annual total since the financial crisis," Fitch analysts Court Lake and Ryan O'Loughlin said in a recent report.
Private RMBS issuance through July 31 totaled $18.8 billion, up from $14.7 billion last year, according to data from Fitch and Bloomberg.
In addition to being the strongest post-crisis year in terms of dollar volume, 2018 has already matched 2015's post-crisis record for transaction volume. There were 40 private-label RMBS deals issued through July of this year. Last year there were 34 transactions issued, and in 2016, there were 22.
A growing amount of nonprime issuance is contributing to higher yearly totals. There were 14 nonprime deals totaling more than $5 billion through July 2018. That means nonprime volume has grown significantly since 2015, when there were just five transactions totaling $500 million. There was virtually no post-crisis issuance of nonprime product prior to that year.
The increase in nonprime securitization and issuance overall during a year when origination volumes are lower suggests loans from a broader range of borrowers are going into deals, which can have implications for loan performance.
So far in 2018, securitized prime jumbo delinquencies are up slightly but delinquencies in the nonprime market are lower.
The 30-day delinquency rate for the nonprime RMBS sector fell to 2% this year from 3.7% in 2017, according to data analyzed by Fitch and CoreLogic's Loan Performance division. The prime jumbo sector's 30-day delinquency rate rose to 0.8% this year from 0.4% last year.