Mortgage Market Monitor February 2019

Monthly Commentary


Market Update

Non-Agency RMBS had a quiet February as monthly totals of both bid list supply and Trace volume established fresh lows since August 2018. Weekly amounts of secondary selling declined continuously throughout the month where during the last week over 7,500 market participants assembled in Las Vegas for the annual SFIG conference. In all, the amount of bonds put out for bid by sellers dropped from 5.5bn to 3.2bn month-over-month while trading as reported by Trace declined by 38% to 8.5bn with dealers shedding 338mm in risk. After a strong January that saw spreads retrace approximately half of the widening observed over the fourth quarter, sponsorship remained stable as legacy spreads traded mostly flat whereas CRT ended February generically tighter by 5-25 bps across the stack.

Unlike the subdued levels of activity in secondary, February’s primary calendar was heavy with new issues that spanned the spectrum of new generation Non-Agency products. The non-QM/expanded prime sector continued to grow both in size as well as in number of issuers. Six transactions totaling over 2bn priced during the period and included an inaugural deal from Seer Capital, RMLT 2019-1. A more comprehensive rundown of issuance is provided below.

Expanded Prime/Non-QM

  • 247mm GMFT 2019-1 backed by expanded prime from Galton: AAA rated 4.5% PT A21 (20.0% CE/3.5 WAL) 135/n, AAA rated 4.0% PT A22 (20.0% CE/3.5 WAL) 130/n, AAA rated 4.5% FCF A41 (20.0% CE/2.2 WAL) 100/n, AAA rated 4.0% FCF A42 (20.0% CE/2.2 WAL) 95/n, AAA rated 4.0% LCF A52 (20.0% CE/ 8.6 WAL) 155/n
  • Redwood Trust's 319mm expanded prime deal SEMT 2019-CH1: AAA rated 4.5% PT A1 (15.0% CE/3.5 WAL) 125/n, AAA rated 4.5% FCF A10 (15.0% CE/2.2 WAL) 90/n, AAA rated 4.5% LCF A13 (15.0% CE/8.6 WAL) 140/n
  • 336mm Non-QM deal DRMT 2019-1 from Deephaven: AAA rated A1 (37.9% CE/2.0 WAL) 100/n, AA/AA+ rated A2 (31.5% CE/2.0 WAL) 115/n, A/AA- rated A3 (19.5% CE/2.0 WAL) 120/n
  • Seer Capital’s first ever transaction 222mm RMLT 2019-1: AAA rated A1 (37.5% CE/2.1 WAL) 120/n, AA/AA+ rated A2 (30.3% CE/2.1 WAL) 135/n, A/AA- rated A3 (17.1% CE/2.1 WAL) 150/n
  • Invictus Capital's 645mm non-QM VERUS 2019-1: AAA rated A1 (31.2% CE/2.1 WAL) 115/n, AA rated A2 (24.7% CE/2.1 WAL) 125/n, A rated A3 (13.5% CE/2.1 WAL) 135/n
  • WAMCO's second overall non-QM issuance 274mm ARRW 2019-1: AAA rated A1 (17.0% CE/3.0 WAL) 120/n, AA rated A2 (11.9% CE/3.0 WAL) 145/n, A rated A3 (5.1% CE/3.0 WAL) 160/n

Prime Jumbo

  • 366mm JPMMT 2019-LTV1 prime jumbo 2.0 deal from JPMorgan containing high LTV collateral: AAA rated 4.0% PT A3 (20.0% CE/4.6 WAL) 1-28 bk Mar FN4.0, AAA rated 4.0% FCF 75% A4 (20.0% CE/2.6 WAL) 1-24 bk Mar DW4.0, AAA rated 4.0% LCF 25% A5 (20.0% CE/10.7 WAL) 150/n, AAA rated 4.0% FCF 62.5% A6 (20.0% CE/2.0 WAL) 75/n, AAA rated 4.0% LCF 37.5% A7 (20.0% CE/8.9 WAL) 146/n, AAA rated L+100 Fltr A11 (20.0% CE/4.6 WAL) 105dm

Credit Risk Transfer

  • Fannie Mae's first CRT deal of the year and second issued as REMIC 960mm CAS 2019-R01: BBB/A rated 2M1 (3.4% CE/1.4 WAL) 85dm, B/BBB- rated 2M2 (1.2% CE/5.6 WAL) 245dm, unrated 2B1 (0.5% CE/10.0 WAL) 435dm
  • Freddie Mac’s first high LTV CRT transaction of the year 640mm STACR 2019-HQA1: BBB-/BBB rated M1 (3.6% CE/1.3 WAL) 90dm, B+ rated M2 (1.5% CE/5.2 WAL) 235dm, unrated B1 (0.6% CE/9.9 WAL) 440dm, unrated B2 (0.1% CE/10.0 WAL) 1225dm

Non-performing/Re-performing

  • Pretium’s unrated NPL transaction 443mm PRET 2019-NPL1: A1 (29.2% CE/1.4 WAL) 4.25% yld, A2 (17.1% CE/2.7 WAL) 6.00% yld
  • 462mm unrated NRZT 2019-RPL1 backed by RPL collateral and issued by New Residential: A1 (30.0% CE/2.5 WAL) 4.25% yld, A2 (18.0% CE/3.0 WAL) 6.00% yld
  • 127mm unrated BOMFT 2019-RN1 from Bayview and collateralized by mix of RPL and NPL: A1 (43.2% CE/1.7 WAL) 4.125% yld
  • Towd Point’s first “HY” series issuance 649mm TPMT 2019-HY1 consisting of performing and re-performing post-reset hybrid ARMs: AAA rated L+100 Fltr A1 (16.0% CE/2.5 WAL) 105dm
  • Lone Star's 205mm unrated NPL deal VOLT 2019-NPL2: A1 (29.3% CE/0.7 WAL) 4.00% yld, A2 (17.2% CE/2.2 WAL) 6.375% yld
  • Credit Suisse’s rated RPL deal 378mm CSMC 2019-RPL1: AAA rated PT A1 (22.5% CE/4.0 WAL) 110/n, AAA rated FCF A1A (34% CE/3.2 WAL) 100/n

Junior Lien

  • 495mm TPMT 2019-SJ1 backed by seasoned performing and re-performing junior liens from Towd Point: AAA rated A1 (48.0% CE/1.4 WAL) 100/n, AA rated A2 (40.6% CE/3.1 WAL) 155/n

Collateral Performance

Serious delinquencies decreased slightly across all sectors in January. Prime decreased by 7 basis point to 3.61%; Alt-A delinquencies decreased by 8 basis points to 9.08%; Option Arm delinquencies decreased by 11 basis points to 16.84% and Subprime delinquencies increased by 8 basis points to 19.67%.

In Puerto Rico, serious delinquencies spiked after hurricane Maria to 27.6% in Prime mortgages, 47.2% in Alt-A mortgages, and 58.8% in Subprime mortgages. These delinquency percentages have been on a declining trend since the beginning of 2018. Prime delinquencies declined 129 basis points to 12.54%, Alt-A delinquencies declined 139 basis points to 26.38% and Subprime delinquencies declined 4 bps to 34.96%.

Voluntary prepayments were mixed across sectors this month. Prime CRRs came in at 10.6%, down 24 basis points month-over-month; Alt-A CRRs were 10.1%, up 16 basis points month-over-month; Option Arm CRRs were 7.2%, down 98 basis points month-over-month and Subprime CRRs were 6.5%, up 58 basis points month-over-month. Month-over-month CDRs were also mixed across sectors. Prime CDRs increased by 9 basis points to 1.03%; Alt-A CDRs increased by 4 basis points to 2.39%; Option Arm CDRs increased by 44 basis points to 4.25%, and Subprime CDRs were flat at 3.76%.

Case-Shiller futures now indicate a flat to slightly declining environment in residential home prices, predicting home prices will increase 0.5% annually during the next four years. Year-over-year, home prices are up 4.2% across Case-Shiller’s 20 major city index. At the national level, changes in severities were mixed across sectors. At the state level, California Subprime severities were higher at 61% this month. Florida Subprime severities were higher at 89%. New York Subprime severities increased to 90%; and Nevada Subprime severities decreased to 81%.

 

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