Private Label RMBS Competes with the GSEs

Recent private-label residential mortgage backed securities have included Government Sponsored Enterprise (GSE) eligible loans, according to a Moody’s report. The research note expects this trend to increase, especially since some private-label RMBS issuers have been able to offer originators better pricing than the GSEs on particular products like high balance loans, where the GSEs loan-level pricing adjustments may make it more economical to sell into PLS channels. Other credit characteristics that may present a comparative advantage for PLS channels over the GSEs include loans with higher credit scores, lower loan-to-value ratios, and fewer cash-out refinances.

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