2017 could be a big year for nonprime

by Ryan Smith16 Feb 2017

2017 could be a big year for nonprime and non-QM lending, according to bond raters and a top nonprime lender.

Citadel CEO Dan Perl told Debtwire that loan applications at the company have risen more than 20% since the presidential election.

“This year, the non-QM markets bust open,” Perl told Debtwire.

And both Fitch Ratings and Kroll Bond Rating Agency see a big year ahead for nonprime. Fitch is anticipating at least $2 billion in nonprime mortgage-backed securities this year, according to Debtwire – up from $1 billion issued in the previous 18 months. Fitch expects as many as nine issuers to bring nonprime mortgage bonds to market this year.

Kroll also said that the tide in nonprime RMBS is “turning quickly,” with more than a dozen nonprime origination programs intending to use securitization as a funding source.

Of course, that’s still just a fraction of the market. Nonprime RMBS volume in 2017 – even accounting for explosive growth – will be less than 1% of the private-label volume of about $2 trillion issued between 2005 and 2007, Debtwire reported.

But with improvements to nonprime programs, many analysts see it as a good time to expand mortgage credit – and for originators to take another look at nonprime.