Extension risk likely for current non-QM securitizations: S&P

Abstract

Approximately 30% of the loans in non-qualified mortgage securitizations S&P rated had no incentive to do a rate and term refinance as of June 9. The average interest rate for this subset of the portfolio was only 100 basis points higher than the average conforming mortgage rate. The prepayment speeds on DSCR loans could move closer in the short to medium term. Several months of significant excess spread compression is likely. The Prepayment rates are likely as a result. The prepAYment rates for these securIZations are likely to be in for a substantial slowdown.