How big can home equity securitizations get?
National Mortgage News
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A cloudy mortgage outlook is opening the door wider for growth in home equity investments. A confluence of events in recent years are driving consumers to borrow against home equity. With a spate of securitizations and new issuers entering the market, investors are seeing more opportunities on offer as a result, coming from home equity lines of credit or loans and new alternative credit platforms. "Our thought is that even if interest rates were to fall 100 basis points, you're still not going to see a refi boom," said Bill Banfield, chief business officer at Rocket Cos. The lender introduced a closed-end home equity loan in 2022 and has since issued three securitizations, with hopes to double that in 2024. Several nonbanks launched similar products. Since that upswing, the secondary market has seen a wave of aggregators or originators offering HELOC-backed residential mortgage-backed securities. As the number of securitizations increase, it brings better pricing.
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Home inventory is increasing, but as high mortgage rates and home prices remain stubborn, many new listings are sitting on the market without contracts, according to reports from Redfin and Zillow. The pandemic-era housing shortage is becoming less severe as inventory accumulates. Zillow found that inventory in May has risen 22% compared to the same period last year. It's still 34% below where it was before the shutdown, but the deficit continues to shrink. The latest Zillow report found that home sellers are re-entering the market but are being met with hesitant potential buyers. Slow contract applications are allowing buyer competition and price growth to lessen.?
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Redwood Trust is the latest nonbank lender to turn to the debt markets to support its operations. The Mill Valley, California-based real estate investment trust has priced $85 million of senior unsecured notes due in 2029 at 9%. The underwriters have an option to purchase an additional $12.75 million for 30 days to cover over-allotments. Proceeds can be used for Redwood's residential and business purpose mortgage lending operations, acquiring mortgage-backed securities for investment and/or for funding long-term portfolio investments and potential acquisitions.
New homes saw sustained demand last month, with scarce existing inventory leaving open a pipeline of aspiring buyers in the market. The Mortgage Bankers Association reported loan applications for the purchase of new single-family homes in May surging 13.8% year over year and up 1% from April. Volumes were not seasonally adjusted and are based off of survey responses from mortgage units of the nation's builders. May's numbers reflected a pullback from growth in April, though, when applications rose by 22.1% annually and 2% month over month. In May 2023, new-home applications also came in hotter at 16.6% and 8%.?
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5 个月Thanks for the updates on, The NMN.