KBRA Releases Research – RMBS Trend Watch: Resilient Market Despite Higher Rates

KBRA provides an update on key RMBS market and performance themes through 1H 2024, including issuance volume trends and forecasts for the remainder of the year, collateral performance trends, and rating surveillance activity.

Key Takeaways

• Year-to-Date (YTD) 2024 Issuance Volume: Despite the residual high interest rate environment, the RMBS 2.0 market has continued its growth trend. Q1 2024 closed at nearly $24 billion, surpassing KBRA’s expectations from earlier this year by $4 billion. It was followed with similar issuance in Q2, which closed at over $24 billion.
• 2024 Issuance Expectations: KBRA expects Q3 2024 to reach $22 billion (up 80% compared to Q3 2023), given the consistently strong quarterly issuance YTD 2024. We expect full-year (FY) 2024 issuance to be approximately $94 billion (up 71% from 2023), representing the third-highest issuance year since the global financial crisis (GFC), behind 2021 and 2022.
• Spreads: Issuance spreads continued an overall tightening trend across all sectors, improving further in Q2 2024.
• RMBS 2.0 Credit Performance: RMBS 2.0 credit performance as of YTD 2024 has continued to show generally consistent outcomes for the prime sector; non-prime late-stage delinquencies have continued to move up, although at a lower rate in recent months. Early-stage delinquencies in credit risk transfer (CRT) indices have followed a downward trend throughout 2024. With mortgage rates trending down since May 2024, we expect prepayment rates to continue to increase, although modestly, assuming mortgage rate directionality is flat to down from current levels.
• Surveillance Activity: This year, KBRA has conducted surveillance reviews of 294 transactions as of June 30 and we have identified 5,431 affirmations, 507 upgrades, and no downgrades. Although KBRA has observed some credit deterioration, specifically in the non-prime sector, we continue to expect relative rating stability given the strength of origination practices, meaningful accumulated home equity, and generally low and fixed mortgage rates within KBRA’s existing universe.

Click here to view the report.

Related Publications

• GSEs Release Historical VantageScore 4.0 Data
• FHFA Closed-End Seconds: Effect on PLS?
• RMBS Credit Indices
• FHFA’s Credit Score Proposal and Its Impacts on RMBS
• 2024 RMBS Sector Outlook: Holding Steady With a Little Upside

About KBRA

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.

Doc ID: 1005239

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