KBRA releases its RMBS Trend Watch, covering updates on key RMBS market and performance themes as of year-to-date (YTD) 2022. In addition, we focus on changes to non-qualified mortgage (NQM) structural features and credit enhancement via excess spread.

Key Takeaways

• YTD 2022 Issuance Volume: Q1 2022 issuance was at almost $43 billion, the second-highest post-GFC quarter ever, and higher than our Q1 2022 forecast of approximately $37 billion.
• 2022 Issuance Expectation: KBRA expects Q2 2022 to close at approximately $38 billion, and Q3 to decrease further to $29 billion across the prime, non-prime, and credit risk transfer (CRT) segments because of rising interest rates and an unfavorable spread environment for issuers. We continue to expect 2022 to close as a record post-GFC issuance year, with over $131 billon in aggregate issuance.
• Spreads: To date, issuance spreads widened rapidly for all sectors as supply and demand volatility hit nearly all-time highs.
• Depressed Excess Spread in Non-Prime: In 2022, investors have broadly demanded wider spreads across RMBS sub-asset classes given expectations regarding extension, among other things.
• Moving Away From Modified Sequential: Prior to COVID-19, nearly all non-prime transactions were issued using the modified sequential structure; however, so far in 2022, the sequential structure has become much more prevalent—accounting for nearly two-thirds of YTD transactions.
• RMBS 2.0 Credit Performance: YTD 2022 credit performance continued to show steadily improving conditions across all sectors.
• Surveillance Activity: As of YTD 2022, KBRA conducted surveillance reviews of 46 transactions, resulting in 1,116 affirmations, 115 upgrades, and no downgrades.

Click here to view the report.

Related Publications

• RMBS Credit Indices
• KBRA’s Global Rating Stability Study: 2011-2021
• KBRA’s Global Rating Transition Study: 2011-2021

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.

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