Despite a slight slowdown in the issuance of prime jumbo residential mortgage-backed securitizations in the third quarter, 2015’s total prime jumbo RMBS issuance has already topped 2014’s total, according to a new report from Fitch Ratings.
This year started off strong with 12 jumbo securitizations being issued during the first quarter. A robust second quarter saw 10 more jumbo securitizations come to market, putting 2015 on pace to be the best year for prime jumbo RMBS issuance since the financial crisis.
Jumbo RMBS issuance slowed somewhat in the third quarter, with seven transactions being brought to market by six issuers, Fitch’s latest quarterly 'US Prime Jumbo RMBS Trends' report showed.
Even with that slowdown, 2015’s total issuance, which is now 29 jumbo RMBS deals for a total dollar issuance of $10.1 billion, has already exceeded 2014’s total, when there were 26 jumbo RMBS deals for a total dollar issuance of $8.3 billion.
“The increased transaction volume reflects a broadening of the number of issuers active in the market,” Fitch said in its report. “Eight different issuers have issued prime jumbo RMBS through third quarter 2015, compared to seven issuers in all of 2014.”
Along with a strong year of jumbo RMBS issuance, the performance of the securitizations remains strong, Fitch said in its report.
According to Fitch’s report, delinquency remains “exceptionally strong” for the sector as a whole, which Fitch analysts Sean Nelson and Craig Ganter said is a reflection of the high quality of the collateral attributes.
“Post-crisis prime jumbo loans are rolling delinquent at one-fifth the rate of pre-crisis prime jumbo loans,” Nelson said.
Additionally, Fitch reported that prepayment speeds declined in the third quarter, due to the slight increase in mortgage rates over the summer.
According to Fitch’s report, jumbo RMBS transactions issued in 2011, 2012 and 2014 have the highest portions of loans with note rates over 4.5% and, therefore, have exhibited the highest prepayment rates.
Prepay speeds may continue to decline as the proportion of loans with refinance incentive declines, especially as the Fed considers raising rates late this year or in early 2016, Fitch said.