Investors Slowly Regaining Appetite for RMBS

According to a recent Pensions & Investments article, institutional investors are slowly regaining their appetite for RMBS offerings. Federal Reserve data shows investments in RMBS in 2014 were up 25 percent over their 2010 levels, totaling $500 billion. While the agency market backed by the federal government is worth approximately $5.2 trillion, the size of the non-agency RMBS market was about $668.5 billion as of November 30th according to Bank of America Merrill Lynch data.

According to the article, many are getting exposure primarily to agency RMBS through their core-plus fixed-income portfolios, with an average exposure of 23.4 percent. Investors note these securities look much different than the ones originated in 2007, as regulatory changes have made them less risky. According to Brian Grow, managing director, RMBS, at Morningstar Credit Ratings LLC, “There are very few subprime borrowers in post-crisis, non-agency securitizations. The loans that are being securitized have real documented homeowner income, a lot of reserves.. nderwriting is a lot tighter.”

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