KBRA Releases Research – 2021 RMBS Sector Update: Q3 Sets up Annual Issuance Record

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) provides an update on key RMBS market and performance themes year-to-date (YTD) 2021 as well as issuance volume trends and forecasts, collateral performance trends, surveillance outcomes, and our rating and research activity through the end of August 2021. In addition, we examine excess spread at issuance and delve into its change over time and how that can potentially relate to ratings and enhancement levels for different tranches in the non-qualified mortgage (QM) space.

Key Takeaways

• 2021 Themes: Continued pandemic-related economic impacts and the consequent monitoring of credit performance will remain important through the end of 2021. Recent regulatory changes from FHFA and their potential impacts on RMBS market will continue to be significant as well, such as, the recent amendments to the PSPAs and the GSE capital rules. Mortgage rates are generally expected to remain low with potentially some marginal increases, continuing to incentivize refinance and purchase activity. Delinquencies relating to COVID-19 are likely to continue their decline through 2021, unless the spread of new COVID-19 variants imposes another wave of closures of local economies.
• YTD 2021 Issuance Volume: Q2 2021 was a record quarter of RMBS 2.0 issuance ($25 billion) and we anticipate Q3 will surpass this level to reach an estimated $29 billion in issuance across the prime, non-prime, and CRT segments. In total, Q1-Q3 is expected to reach combined issuance of $72 billion. This means that YTD 2021 is already a record year for post-GFC RMBS issuance, with Q4 to extend on the gains.
• 2021 Issuance Expectation: KBRA expects Q4 2021 will close at about $24 billion, with an estimated $14 billion in prime issuance, non-prime ($9 billion) and CRT ($1.2 billion); overall 2021 issuance should hit $96 billion, making it a new record year for RMBS issuance post-GFC.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.