Moody’s Investors Service
is forecasting a strong level of credit quality and performance of residential mortgage-backed securities (RMBS) in 2019, although the level of strength will be slightly weaker compared to this year.
In its 2019 Outlook for the RMBS sector, Moody’s cited a loosening of underwriting fueled by increased competition among lenders, particularly for prime jumbo and credit-risk transfer transactions. While this occurs, Moody’s is also forecasting more increases in interest rates during 2019, along with continued problems with affordable homeownership opportunities. Moody’s also predicted the credit quality of new non-prime RMBS will benefit from relatively stringent underwriting standards, adding that the volume in will grow in 2019 as based on borrower demand and on the renewed interest by issuers look to securitize non-standard loan types.
“The credit quality of new mortgages will remain solid in the coming year on the back of healthy borrower metrics and economic conditions,” said Max Sauray, a Moody’s Assistant Vice President and Analyst. “Nevertheless, as the credit cycle matures, we expect some weaknesses that have emerged in recent years to worsen slightly in 2019.”