Is TRID to Blame for Jumbo MBS Disappearance?

For the last ten years, jumbo mortgage-backed securities (MBS) have been easing their way back into the market, but did the implementation of TRID and other factors put a stop to growth in this sector?

Jumbo MBS was considered a nonconforming product a decade ago when subprime gave nonconforming a bad reputation, even though many jumbo securities were prime credits, according to CoreLogic's April 2016 Market Pulse report.

"The sector has spent the last ten years trying to re-esatblish a steady market," said Sam Khater, Deputy Chief Economist at CoreLogic. "And just when it seemed that the market was gaining traction, economics, low interest rates, and compliance all turned into headwinds."

The entire private-label securities (PLS) market has been mostly flat since its dropoff in 2007, never quite reaching an upside. The prime jumbo purchase market reached its height at $100 billion in 2005 and began to show new signs of life in 2012, the report showed.

Khater stated that the new "TRID rules, some observers believe, are exacerbating the challenger of prime jumbo securitization."

"Having a healthy private-label securities market is an essential part of a healthy, robust mortgage market," Khater explained. "It is the missing piece in the recovery."

U.S. prime jumbo residential mortgage-backed securities (RMBS) has already passed the 2014 total, according to a report from Fitch Ratings.

Although the third quarter of 2015 only saw seven RMBS transactions from six issuers, a continued decline from 12 transactions in the first quarter and 10 transactions in the second quarter, the 29 transactions and approximately $10.1 billion of issuance so far this year have already exceeded the 26 transactions and $8.3 billion issued in 2014.

"The increased transaction volume reflects a broadening of the number of issuers active in the market," the report said. "Eight different issuers have issued prime jumbo RMBS through third quarter 2015, compared to seven issuers in all of 2014."