Fitch Ratings: RMBS Market Faces Uncertainty

While the new issue private-label residential mortgage-backed securities (RMBS) market reportedly is running along at a solid clip, a report by Fitch Ratings shows that some widespread developments and unknowns coming in 2021 could impact the volume of new deals.

"New purchase and refinancing activity will remain elevated into 2021," Fitch reported. "Recovery will likely vary by location and home-price tier. Housing supply constraints are likely to remain until the effects of the pandemic begin to wane."

A statement from Fitch predicted that, with the Biden administration's most immediate focus on stemming the tide of the global pandemic, foreclosure moratoriums and forbearance plans will likely continue to be extended until lockdowns are lifted and local economies and jobs recover.

That means demand for higher-priced single-family homes should remain high with mortgage rates staying low.

"Home price growth has accelerated more notably in suburbs of cities like New York City, Washington D.C., Boston and San Francisco than in their once crowded central business districts,' said Senior Director Suzanne Mistretta. "Longer term, however, home price growth in these suburbs will likely cool over time as the comfort level with central business districts increases with rising vaccination rates and the health crisis waning."

Fitch reports that it is also keeping a close eye on the new QM rule, which goes into effect 60 days after publication in the Federal Register on March 1.

The potential for a shift in policy and enforcement initiatives that may be undertaken by the new director of the Consumer Finance Protection Bureau (CFPB) once appointed also adds to the uncertainty.

"With a new CFPB director, some of the provisions may be revisited or the effective date could be postponed, adding some uncertainty to the impact of the new rule on issuance volume and loan documentation standards," Mistretta said.