![]() “Furthermore, third-party review (TPR) firms conduct credit, compliance, valuation, and data integrity reviews on the loans in new U.S. “Issuers have skin in the game under risk-retention requirements that encourage the alignment of issuer and RMBS noteholder interests,” Fitch said. It added that lenders are now subject to more stringent lending and disclosure laws, including the ATR Rule and the TILA-RESPA Integrated Disclosure (TRID) rules. “These products offer borrowers lower monthly mortgage payments in the near term, with borrowers looking to refinance in the future when rates drop.”įitch said it does not believe the resurgence of affordability products akin to those seen in the run up to the 2008 financial crisis “will result in a similar extensive deterioration in performance, as a number of safeguards are now in place to prevent a repeat of the implosion of the private label U.S. “Although the majority of loans in Non-QM RMBS transactions are 30-year fixed-rate loans, an increasing volume of mortgages have affordability product features - such as over 40-year terms to maturity, interest-only periods, adjustable rates, and balloon payments,” Fitch said in its report. The subscription service is currently unavailable. Non-QM, 30-year, fixed-rate loan rates typically are a percent or two higher than the prime 30-year fixed mortgage rate, which increased from the mid-3% range to over 7% in 2022, and now hovers around 6.5%-7%.įreddie Mac said Thursday that the 30-year fixed mortgage rate increased again in the past week, and now sits at 6.65%. 27, Fitch said rising mortgage rates and high home prices are reducing home affordability, prompting originators to increase production of more affordable Non-QM mortgages, or “affordability products.”Īffordability products allow a borrower to qualify for a loan and make the monthly payments through longer terms to maturity or other features, satisfying the Consumer Financial Protection Bureau's Ability to Repay (ATR) Rule.įitch said it does not expect ratings to be affected as a result of the growth of Non-QM mortgage products, given robust credit enhancement for Fitch-rated residential mortgage-backed securities (RMBS) transactions. Fitch Ratings says it assumes a higher rate of loss for non-qualified mortgage (Non-QM) loans, even though borrowers and lenders face more strict lending rules as a result of the 2008 financial crisis.
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