In our latest research, we look in depth at the behaviour of US MBS since the COVID crisis, comparing that event with the impact of the great financial crisis on mortgage-backed securities.
There are some striking differences between the impact of the two events, and thus far, little sign of the calamitous impact of 2008. We suggest a number of reasons for this: Subprime RMBS is not at the heart of events this time round; the Fed moved more quickly this time around to shore up the Agency MBS market, learning the lessons of the GFC; (prime) mortgage rates are at, or near, all time lows; and structural developments in the RMBS market, after the near destruction of Fannie Mae and Freddy Mac, have dampened alarm.
But cracks are appearing in some credit metrics at the lower end of the market. In particular, there are signs of high deterioration in payment performance for non-qualifying mortgages (Non-QM), and tightening mortgage credit availability, which may yet prove a threat to both mortgage and housing stability.
For more on the state of the US housing and RMBS, read the paper.
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