Fitch Ratings: Solid U.S. RMBS Market Faces Uncertainty

Fitch Rating, New York, said the new-issue private-label U.S. residential mortgage-backed securities market is humming along at a solid pace, though it says some broader developments in the coming year could influence the pace of new deals.

Fitch Senior Director Suzanne Mistretta said with the Biden administration’s most immediate focus on stemming the tide of the global pandemic, foreclosure moratoriums and forbearance plans will likely continue to be extended until lockdowns are lifted and local economies and jobs recover. This means demand for higher priced single-family homes will remain high with mortgage rates staying low.

“Home price growth has accelerated more notably in suburbs of cities like New York City, Washington D.C., Boston and San Francisco than in their once crowded central business districts,” Mistretta said. “Longer term, however, home price growth in these suburbs will likely cool over time as the comfort level with central business districts increases with rising vaccination rates and the health crisis waning.”

Another unknown Fitch is keeping a close eye on is the new QM Rule, which becomes effective 60 days after publication in the Federal Register on March 1. Among the notable revisions include removal of the 43% debt-to-income (DTI) limit in place of price-based thresholds.

“With a new CFPB director, some of the provisions may be revisited or the effective date could be postponed, adding some uncertainty to the impact of the new Rule on issuance volume and loan documentation standards,” Mistretta said.