Private-label RMBS issuance will hit $30 billion: JPMorgan
With Redwood Trust and Credit Suisse sealing the first four nonagency residential mortgage-backed securities deals of the year, many market experts are confident RMBS issuance will exceed the $6 billion volume reached in 2012.
JPMorgan Chase (JPM) is no exception. The company believes that other entities — including its own institution — will make a comeback into the private-label securitization market in 2013, including real estate investment trusts as well as big banking companies such as Wells Fargo (WFC) and possibly Bank of America (BAC), according to John Sim of JPMorgan Securitization Products Research.
As a result, nonagency RMBS issuance volume is expected to fall somewhere between $20 billion and $30 billion in 2013, Sim noted.
The expected growth of new private-label securitization will be effected by the current and forthcoming market regulations, specifically the finalized qualified mortgage rule and the impending qualified residential mortgage standard, Sim stated.
In a chart Sim presented at the JPMorgan securitization conference this week, he outlined the highlights of the QM rule including full documentation, limits on ARM rate assets and debt-to-interest less than or equal to 43%. Additionally, SIM outlined potential guidelines in the QRM rule, including a maximum loan-to-value ratio of 80% and a minimum FICO score of 690.
JPMorgan’s issuance projection far exceeds other market analysts’ projections, particularly Standard & Poor’s, which noted that RMBS issuance is on track to generate about $12 billion this year.
As of February, the credit rating agency reported that year-to-date total for all nonagency issuance was $1.7 billion.
"Agency issuance continues to dominate the market, but several issuers are accumulating collateral," according to industry reports.
On a similar note, Amherst Securities Group stated that the nonagency market came out of the gate strong in 2013 with a 3.30% return in January. However, nonagency issuance only produced a 0.33% return in February.