Fitch: Fourth quarter set post-crisis record for jumbo RMBS issuance

Still room to boom, though

The last three months of 2014 saw more prime jumbo residential mortgage-backed securitizations issued than in any quarter since the financial crisis began, but the issuance is still “glacial by historical standards,” according to a new report from Fitch Ratings.

There were 11 prime jumbo RMBS issuances in the fourth quarter of 2014, according to Fitch’s data, making it the most active quarter since the crisis.

Despite the strong fourth quarter, 2014’s prime jumbo RMBS issuance actually declined from 2013, falling from 31 deals with a total issuance of $13.1 billion in 2013 to 27 deals with a total issuance of $8.6 billion in 2014.

For comparison, there were 9 deals in 2012 with a total issuance of $3.5 billion, 2 deals in 2011 with a total issuance of $700 million and only 1 deal in 2010, with a total issuance of $200 million that year.

According to Fitch’s data, there were $474 billion worth of jumbo RMBS deals were issued from 2005-2008. Since 2010, the total issuance is $26.1 billion.

But the strong fourth quarter could be a harbinger of things to according to Grant Bailey, Fitch managing director. The reason why? The new players who joined the market in 2014.

“Another development worth noting is that different names are tapping the RMBS market with increasing frequency, with six issuers coming to market with new deals,” Bailey said. “More new names are likely to test the private label RMBS market this year.”

In 2014, new issuers like WinWater Home Mortgage, which refers to itself as “a residential mortgage conduit aggregator focused on opportunities in the non-agency jumbo sector, brought multiple jumbo RMBS transactions to the market.

WinWater brought three deals to market in 2014. WinWater’s last offering of 2014 was backed by a pool of 356 loans with a total principal balance of $263,678,317. The offering received AAA ratings from DBRS.

Also during the fourth quarter, the market saw the return of one of the most notorious names from the mortgage crisis, as Goldman Sachs (GS) launched its first post-crisis jumbo RMBS in November.

The offering, called Goldman Sachs Mortgage-Backed Securities Trust 2014-EB1, was backed by 366 first-lien, residential mortgage loans with an outstanding principal balance of $282,800,740. The average loan balance in the offering was $772,680.

According to Fitch’s report, not only has issuance picked up speed, prepayments have begun escalating as well.

“Mortgage rates have dropped almost 75 basis points from the start of 2014,” Fitch said in its report. “Prepayment speeds quickened in the fourth quarter, reflecting the increased refinance incentive. Transactions issued in 2014 collateralized with loans originated in late 2013 exhibited the highest prepayment rates.”

Delinquencies also remain remarkably low, according to Fitch’s data. “Across all pools this month, including more than 20,000 outstanding loans, only five borrowers were more than 90 days delinquent,” Fitch said in its report. “No transaction contains more than one loan over 90 days delinquent, and foreclosure initiation has not yet been reported for any of them.”

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