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Securitization in Focus — December 2023

Douglas Gimple

Residential Mortgage-Backed Securities (RMBS)

 

Issuance Recap, 2023

2023 issuance was the lowest since 2016 ($66B) and roughly 50% of 2022 issuance.

  • Single family rental (-72% YoY)
  • Prime Jumbo (-69% YoY)
  • Government Sponsored Entity Risk Share (-63% YoY)

Annual Issuance ($B)

Exhibit 1

As of 31 Dec 2023.

Performance Highlights

RMBS market bounced back in 2023, up 5%, after being decimated in 2022 with a near 12% decline.

Most of the 2023 bounce came in Nov-Dec, as the Bloomberg US Mortgage Backed Securities (MBS) Index advanced 9.8% after falling 4.3% in the prior 10 months.

Notable Performance, Change in
Fannie Mae’s Refinance Application-Level Index (RALI)
Percent Change for Week Ending 5 January 2024		 %
 WoW +38.1
 YoY -4.1
 4-week Average -3.5
Notable Performance, Historical Comparisons %
 Q3 2020 Refinance Boom -91.9
 Q4 2018 Refi Slowdown -44.0
 5-Week Period Ended 6 Oct 2023 +2.6

Mortgage Rates

30-year fixed mortgage rates are currently hovering near 7% (according to Bankrate.com), down roughly 100 basis points since their October 2023 peak of 8.09%, which was the highest level since June 2000.

Delinquency Rates

Non-agency RMBS performance remains strong with non-qualified mortgage delinquency rates at 2.55% while prime delinquency rates are at 0.39%. 2023 vintage mortgages are the weakest.

Commercial Mortgage- Backed Securities (CMBS)

 

Issuance Recap, 2023

  • $115 billion in agency CMBS (-28% YoY)
  • $42 billion in non-agency CMBS (-42% YoY)
  • $7 billion in CRE CLO (-78% YoY)

Annual Issuance ($B)

Exhibit 1

As of 31 Dec 2023.

Issuance Detail
2022-2023 ($B) and YoY Percent Change (%)

Exhibit 1

As of 31 Dec 2023.

Asset-Backed Securities (ABS)

Issuance Recap, 2023

ABS supply was flat or declined year-over-year (YoY) for most sectors in 2023, but the increase in the supply of auto (+$40 billion YoY) and digital infrastructure (+$8 billion YoY) was more than enough to offset the laggards.

Annual Issuance ($B)

Exhibit 1

As of 31 Dec 2023.

Issuance Detail
2022-2023 ($B) and YoY Percent Change (%)

Exhibit 1

As of 31 Dec 2023.

Delinquencies (%)

30+ Day Delinquencies Annualized Net Loss
Dec MoM YoY Dec MoM YoY
Subprime Auto 14.80 0.26 0.81 9.30 -1.04 1.26
Prime Auto 1.80 0.06 0.23 0.70 0.06 0.17
Bank Card 1.50 0.04 0.48 2.00 0.02 0.79
Retail Card 3.00 0.03 1.18 5.10 0.08 1.91
Personal Loan 6.60 0.66 -0.07 10.60 1.64 1.44
Marketplace Lending 6.00 -0.25 0.17 16.10 -1.04 0.36

As of 31 Dec 2023.

Sources: Citi Global, Barclays, Deutsche Bank, Bloomberg, Fannie Mae’s Refinance Application-Level Index.

SASB — Single asset, single borrower. CRE CLO — Commercial real estate collateralized loan obligation.

The Bloomberg US Mortgage Backed Securities (MBS) Index tracks fixed-rate agency mortgage backed pass-through securities guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA) and Freddie Mac (FHLMC). The index is unmanaged, includes net reinvested dividends, does not reflect fees or expenses (which would lower the return) and is not available for direct investment. Index data source: Bloomberg Index Services Limited. See diamond-hill.com/disclosures for a full copy of the disclaimer.

The views expressed are those of Diamond Hill as of January 2024 and are subject to change without notice. These opinions are not intended to be a forecast of future events, a guarantee of future results or investment advice. Investing involves risk, including the possible loss of principal. Past performance is not a guarantee of future results.

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