It's likely the future mortgage market will feature a standardized, almost plain-vanilla mortgage product, some analysts suggest.
But on the other hand, analysts in the mortgage finance space believe the market will be perpetually lost without the return of private capital and a more robust system of lending.
Paul Miller with FBR Capital Markets suggests in a new report that the "ability to repay rule" and the qualified-mortgage rule are almost ensuring the long-term survival and "dominance" of the 30-year, fixed-rate mortgage and the end of products that surfaced during the housing bubble.
And with that being the case, private capital may likely find less room to flourish. Fewer mortgage products mean fewer mortgage players. Miller estimates the Dodd-Frank rules will, therefore, give preference to loans securitized by Fannie Mae and Freddie Mac.
"This preference, the guarantee on principal and interest on Fannie Mae and Freddie Mac securities, and the removal of subprime product features should make the return of meaningful private securitization extremely unlikely, in our opinion," he wrote. "These changes should also prevent new entrants from eroding underwriting standards in an attempt to increase market share."
But the marketplace generally has been anticipating a focus on getting private capital back into the market and sees little room for growth without it.
Companies like Redwood Trust (RWT) have already made a play in this space over the course of the past few years and emit a certain confidence about private-label RMBS deals. Redwood Trust recently launched its sixth residential mortgage-backed securities transaction of the year, highlighting a deal complete with high-quality, fixed-rate mortgages.
"We cannot see a recovery in housing without a private MBS market," noted Christopher Whalen, an investment banker with Tangent Capital Markets. "This market is already forming and the names will be more familiar in time."
Yet, the market also is saying it's too early to tell what the ultimate effect of the CFPB's final draft rules will be until they surface. Mortgage Bankers Association CEO David Stevens suggested in the past few months that the CFPB has been open to market concerns about the 20% downpayment requirement and other draft rules being too stringent. For segments of the market, this suggested the possibility of final rules that are more flexible in scope. Although, it's unknown at this point.
"Before anyone comments, it is important to see what the CFPB comes out with," said Suzanne Mistretta with Fitch Ratings. "How the QM comes out has huge reprecussions for securitizations and private-label RMBS."