Private Label RMBS on the Rebound

According to an article from CNBC, private label residential securitizations are making a comeback. CNBC writes that that while PLS accounted for nearly 60 percent of the securitized mortgage market in 2006, it now accounts for less than 5 percent of the current market. However, a number of factors may improve PLS market share. The underwriting, documentation, and loan-to-value ratios of mortgages being securitized in PLS have all improved since before the crisis. Additionally, rising interest rates are likely to be more favorable to PLS.

CNBC, quoting Guy Cecala at Inside Mortgage Finance, writes: "One of the things that killed the prime jumbo securitizations is lenders have been so competitive with doing portfolio loans. In a low interest rate environment there was no way to price the securities high enough to get any investor attention." The article concludes that the reinvigoration of the private label market will help creditworthy borrowers who fall outside of the government’s strict definition of a qualified mortgage, while also providing value to investors. "Compared to other loans, the subprime of the past, they're very high quality," said Cecala. "I think investors will eventually start buying them more. The yields are good."

Project RMBS 3.0 is an initiative of SFIG, established with the primary goal of re-invigorating the private label RMBS market. Established by SFIG members, the project seeks to reduce substantive differences within current market practices through an open discussion among a broad cross-section of market participants. If you would like to join the RMBS 3.0 Task Force, email

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