Wells Fargo Securities analysts Vipul Jain, Philip Hong, and Samuel Cecil keep a close eye on the secondary mortgage markets for their clients.

In their latest email, the analysts note that November was jam-packed with non-performing loan trading volume.

“We saw two NPL deals price last week, adding more than $500 million in bonds. In November, we saw about $7.2 billion in bonds priced, which is among the highest monthly volume since the crisis,” they said in the email. “Going into year-end, we expect the primary market to be slow.”

Citing Bloomberg data, the Wells Fargo analysts say that among the NPL deals in the pipeline are a Freddie Mac SCRT deal backed by re-performing loans, a STACR deal that includes HARP collateral, and a multi-borrower SFR transaction with a Freddie Mac guaranteed senior.

Non-agency volume, on the other hand, remains below average. Total volume approaching year’s end is under $3 billion compared to $3.64 billion in 2016, they said.

However, looming tax reform remains the elephant in the room. We can now see how the reform negatively impacts both mortgage finance workers and potential homebuyers and sellers. On the secondary side, the implications are more of a mixed bag.

“Under either version, the changes are generally viewed as favorable to the corporate market and positive to credit spreads,” the analysts said.

However, the analysts added: “both versions would reduce the attractiveness of mortgage financing. We see this as a longer-term negative to the housing market as homebuyers would have less incentive to purchase more expensive homes.”

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