Moody's: COVID-19 Fallout will Drive RMBS Originators to Uphold High Standards in 2021, but Weaken Existing Deals' Performance

Moody's credit analysts have published the attached outlook for the residential mortgage-backed securities market for 2021.  This outlook covers all sub-sectors of RMBS rated by Moody's including prime jumbo, non-prime, GSE credit risk transfer and single-family rental transactions.

From the summary of the report:

“Lender and sponsor responses to COVID-19 will support strong credit quality for new deals in 2021, as underwriting standards remain somewhat tighter than pre-pandemic levels for most new residential mortgage-backed securities (RMBS). Furthermore, structural features in new deals will mitigate cash flow disruptions tied to COVID-19 payment holidays. However, for existing transactions, defaults will rise among financially strained borrowers when relief plans expire, while historically high home prices will motivate others to make mortgage payments or refinance.”