KBRA Releases Research – 2022 RMBS Sector Outlook: Record Year on the Horizon

Kroll Bond Rating Agency (KBRA) releases its 2022 RMBS Sector Outlook, which provides an update on key RMBS market and performance themes year-to-date (YTD) 2021 as well as issuance volume trends and forecasts for 2022, collateral performance trends, and surveillance outcomes. In addition, the report discusses the RMBS 2.0 spread environment at pricing.

Key Takeaways

• YTD 2021 Issuance Volume: Q4 2021 is forecast to close another record quarter of RMBS 2.0 issuance ($38 billion or 3x versus Q4 2020 issuance volume) across the prime, non-prime, and CRT segments. In total, Q1-Q3 2021 reached combined issuance of $78 billion.
• 2022 Issuance Expectation: KBRA anticipates that Q1 2022 issuance will be on par with Q4 2021, at around $37 billion. This breaks down to an estimated $23 billion in prime issuance, non-prime ($9 billion), and CRT ($4.8 billion); overall 2022 issuance should hit $132 billion, extending the record for RMBS issuance post-global financial crisis (GFC), with prime leading the volume at almost $78 billion.
• 2022 Themes: While issuance surprised to the upside in 2021, continued pandemic-related economic impacts and the consequent monitoring of credit performance will remain important in 2022. Labor and other supply shortages as well as the specter of increased inflation rates remain a threat to recovering economic fundamentals. Mortgage rates are generally expected to remain low with potentially some marginal increases, continuing to support purchase activity at least in the short term. Home price increases continue to be above long-term averages which is positive for existing loan performance, although housing affordability will be a key metric to watch over the coming year. Aside from performance and investor appetite, which could see volatility due to the aforementioned economic trends, capacity concerns across the RMBS supply chain will be a key driver of origination and issuance. All areas of the PLS ecosystem suffered growing pains in support of the volume increases obtained in 2021.

Click here to view the report.

Related Publications

• RMBS Credit Indices

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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