Fitch: Prime jumbo RMBS on pace for best year since crisis

More issuers coming to market

A strong second quarter has 2015 on pace to be the best year for prime jumbo residential mortgage-backed securitization issuance since the financial crisis, according to a new report from Fitch Ratings.

Per Fitch’s recently published quarterly U.S Prime Jumbo RMBS Trends report, there were eight jumbo RMBS deals from six issuers brought to market in the second quarter of 2015.

Despite that figure being slightly down from the first quarter, when there were 12 deals from seven issuers, there have already been 20 total transactions in 2015, representing $7.1 billion.

Those numbers compare favorably to 2014, when there were 26 total deals for $8.3 billion.

According to Fitch’s report, 2015 is not only on pace to surpass 2014’s total jumbo RMBS issuance, it’s also on track to eclipse 2013’s total issuance of $13.1 billion in 31 deals, which was the highest since the crisis began.

“The slowly increasing pace of new RMBS issuance reflects more issuers willing to tap the market,” said Fitch Director Sean Nelson.

Nelson adds that the performance of the post-crisis jumbo RMBS remains “exceptional,” with only eight borrowers out of roughly 32,000 outstanding loans at 90 or more days delinquent.

Fitch also noted that only one loan has undergone a modification through the second quarter of 2015, with that loan representing just 0.12% of its respective outstanding pool balance.

Additionally, Fitch noted that prepayments continued to increase steadily in 2015 thus far.

“Mortgage rates are down about 50 basis points from the start of 2014 but have recently begun to increase and are slightly above 4% for the first time in eight months,” Fitch noted in its report. “Transactions issued in 2011, 2012 and 2014 have the highest portions of loans with note rates over 4.5% and, thus, have exhibited the highest prepayment rates.”

Fitch also reported that it upgraded 56 classes in 14 deals, citing the improved relationship between credit enhancement and collateral loss expectations.

According to Fitch’s report, on average, the current credit enhancement percentage for classes that were upgraded is over two times higher than the original CE percentage.

All upgrades were a single rating category in magnitude and were only considered for transactions with at least two years of seasoning, Fitch said.

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