Private Securities Ready to Set Post-Crisis Record


This could be the most important year for agency-less residential mortgage-backed securitization since the Great Recession real estate crash shut down this market, according to a report by rating agency Kroll Bond.

An estimated $ 29 billion for the third quarter, added to around $ 43 billion in the first half, allows annual emissions to easily surpass their previous post-crisis high, which was set in 2019 at around $ 60 billion. While the current forecast of $ 96 billion for 2021 still represents a fraction of the overall mortgage market and a long way from the days when the volume exceeded $ 1 trillion before the crash, it would represent the largest increase in annual emissions seen. for several years. .

It also represents a turnaround from a period of the 2020 pandemic where some companies withdrew from this market. In addition, it raises questions as to the extent to which lenders’ interest in taking on a wider range of mortgages could fuel growth.

That said, with some of the increase in volume representing loans pushed into the market by product restrictions two major buyers of government-linked loans are to suspend, it could slow the market growth in the future.

KBRA has included the issuance of credit risk transfers that the two government-sponsored companies sell to private market investors as part of its 2021 volume estimate. However, even without CRT, the 2021 forecast would still be a record, well over $ 80 billion. CRT could be more influential in Q4 as regulatory restrictions on it are canceled.

The main driver of private securitization remains the larger loans granted outside the two GSEs. compliant limits borrowers with strong credit profiles. KBRA’s forecast suggests that around $ 60 billion of the 2021 volume will come from this blue-chip jumbo sector, but also that the volume from the non-core market could be a bit higher this year.

Although growing, securitized unsecured loans to borrowers with lower credit ratings or who do not otherwise qualify for compliant or government loans still represent a relatively small share of the private market. In addition, this segment is now regulated by repayment capacity requirements that did not exist when the more flexible subprime loans contributed to the crash of the Great Recession.


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