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The issuance of new U.S. prime jumbo residential mortgage-backed securities (RMBS) is set to exceed last year’s levels thanks to a strong second quarter of RMBS issuance, according to Fitch Ratings’ quarterly U.S. Prime Jumbo RMBS Trends report.
The Fitch report notes that eight jumbo RMBS deals came to market in second-quarter 2015 from six issuers. Although this number is slightly lower than the 12 RMBS deals from seven issuers that were brought to market in the first quarter of 2015, the amount of new transactions only added to an already strong first half of the year.
“The slowly increasing pace of new RMBS issuance reflects more issuers willing to tap the market,” said Fitch Director Sean Nelson.
According to Fitch, the $7.1 billion worth of RMBS issuance thus far in 2015 is on track to surpass not only the 2014 total of $8.3 billion, but also the 2013 total of $13.1 billion.
Fitch also reported that prepayment speeds are increasing steadily in 2015, with mortgage rates down 50 basis points from the beginning of 2014. However, rates have recently began creeping up and are just above 4 percent for the first time in eight months.
“The performance of post-crisis RMBS remains exceptional,” Nelson said. “Only eight borrowers out of roughly 32,000 are more than three months behind on their mortgage. In addition, mortgage rates have dropped about 50 basis points from the start of 2014, resulting in a modest increase in prepayment speeds.”
On July 2, Fitch upgraded 56 ratings in 14 transactions to demonstrate their improved relationship between credit enhancement and collateral loss expectations.
“On average, the current credit enhancement (CE) percentage for classes that were upgraded is over two times higher than the original CE percentage,” the report said. “All upgrades were a single rating category in magnitude and were only considered for transactions with at least two years of seasoning.”
Click here to view Fitch Ratings' U.S. Prime Jumbo RMBS Trends report.
