Kroll Bond Rating Agency (KBRA) releases research following the Treasury Department’s January announcement to limit the GSEs’ acquisition of single-family mortgage loans secured by non-owner occupied (NOO) properties. In this report, we examine the relative size of these GSE (Fannie Mae and Freddie Mac) purchase limitations across RMBS markets, recent issuance trends, and historical performance for these loans compared with the more typical owner-occupied loans.
As a result of the GSE 7% purchase limitation, KBRA expects RMBS PLS issuance of NOO-secured Agency-eligible loans to expand meaningfully, potentially by an estimated $10 billion-$20 billion in annual volume as originators look for alternative buyers.
Historically, performance of loans backed by second homes have tended to outperform owner-occupied loans, while investment property loans have generally underperformed, particularly in periods of stress, such as the global financial crisis.
Recent issuance consisting solely of prime, Agency-eligible investment property loans has performed relatively in line with the overall prime RMBS sector, even through the pandemic.
Click here to view the report.
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.
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Jack Kahan, Senior Managing Director
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Ashish Sharda, Senior Director
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Armine Karajyan, Director
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Patrick Gervais, Managing Director
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