Measuring RMBS Transactions

CoreLogic has released its May 2019 ABX Collateral Performance report, which covers all four ABX indices and provides month-end updates on delinquency, prepayment, and default statistics on 80 non-agency residential mortgage-backed securities (RMBS)  transactions. CoreLogic’s ABX pools include RMBS transactions from JPMorgan Chase, Carrington, CitiGroup, and more.

The first pool, ABX Group 06-1, with a pool factor of 2.82%, holds an Unpaid Principal Balance (UPB) of $776.88 million. ABX Group 06-2, with a pool factor of 6.04%, holds a UPB of $1759.66 million. ABX Group 07-1 has a pool factor of 7.75% and a UPB of $1816.05 million. The last group, ABX Group 07-2, with a pool factor of 12.39%, holds a UPB of $2978.63 million.

According to data from Morningstar Credit Ratings, credit performance of residential mortgage-backed securities (RMBS) backed by nonqualified mortgage loans remained strong in Q1 2019, and Wells Fargo’s “2019 Midyear Outlook Eyes Forward: Opportunities and Challenges,” notse that RMBS is a favored fixed-income sector.

Non-QM RMBS issuance also climbed in the first quarter, as several first-time issuers launched transactions. Morningstar rated seven new transactions that quarter, which brought the total number of non-QM RMBS deals we rated through the end of March 2019 to 23. The weighted average Morningstar loan-to-value ratio, or LTV, was 68.5% and the weighted average FICO score was 693, though the average loan size of $395,662 is below that of most other deals, while the weighted average coupon rate of 7.1% was the highest amongst the deals Morningstar rated.

“As noted in our RMBS outlook for 2019, we expect non-QM RMBS issuance to continue to increase in 2019, with the credit quality of the collateral weakening somewhat but remaining overall consistent with the prior year,” said Morningstar in a release. “Also, we expect the non-QM RMBS transaction structures to evolve as issuers explore ways to optimize funding costs and maximize proceeds from securitization.”