Securitization in Focus — January 2025
Asset-Backed Securities
The ABS market began the year on a strong note, with nearly $34B in new issuance. However, this represents a 9% decrease compared to January 2024. Significant declines were observed in credit card ABS (-96% MoM) and equipment ABS (-34%). These decreases were counterbalanced by growth in the auto ABS segment, which increased by 5.6% driven by higher volumes, and the "Other" category, which rose by 15%.
ABS Issuance ($B)
|
Jan 2025 |
| Auto |
23.3 |
| Credit Card |
0.2 |
| Education Loans |
0.0 |
| Equipment |
3.0 |
| Other |
7.1 |
| Total |
33.6 |
Delinquencies (%)
Consumer snapshot to start the year.
Commercial Mortgage-Backed Securities
CMBS Issuance ($B)
CMBS issuance began the year strong, 71% higher than 2024 levels and 211% above 2023 levels. Single-asset, single-borrower (SASB) maintained its leadership in the sector, accounting for approximately half of the total issuance.
Delinquency Rates (%)
After six consecutive months of rising delinquency rates, which pushed the overall CMBS delinquency rate up by 120 bps, the trend reversed slightly in the latest data. The overall rate declined by one basis point to 6.56%. The most notable change came from the heavily impacted office sector, where the delinquency rate dropped by 78 bps to 10.23%. Meanwhile, the other four major property types showed modest increases in delinquency, with only the industrial sector rising by more than 10 bps.
Residential Mortgage-Backed Securities
Non-Agency RMBS issuance had a solid start to the year, surpassing first-month issuance levels for both 2024 and 2023.
RMBS Issuance ($B)
Key
Non-QM: Non-qualified mortgages
CAS/STACR: Connecticut Avenue Securities /Structured Agency Credit Risk
SFR: Single-family rentals
RPL/NPL: Re-performing loans/Non-performing loans
Breakdown of Non-QM Types (%)
Adjustable rate, non-qualified mortgage production levels drop as rates climb.
*Bankrate.com US Home Mortgage 30Y Fixed National Average
Delinquencies
Non-qualified mortgage 60+ day delinquencies increased 1.1% since January 2024 to 3.6%.
- 2022 vintage 4.0%
- 2023 vintage 5.0%
- 2024 vintage 1.8%
Prime RMBS 60+ day delinquencies remained stable at 0.47% over the past year. With average home prices appreciating by 50% since 2020, balance sheets have strengthened. Homeowners are expected to continue leveraging home equity through HELOCs or other methods to preserve their low first-lien mortgage rates.
Sources: Bank of America, Deutsche Bank, Trepp, Bankrate.com.
The views expressed are those of Diamond Hill as of February 2025 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.