The Wall Street Journal reports that investors are expecting continued growth in the private-label mortgage market (PLS) amid an influx of new loans available for purchase. Fannie Mae and Freddie Mac will face greater competition given its decision earlier this year to set new caps on its purchases of loans linked to investment and multifamily properties. Many lenders hindered by these new restrictions are finding it more difficult to sell loans to the GSEs and instead are selling to large banks. According to the WSJ, the PLS market had more than $42 billion of issuance in the second quarter which is the most since the pandemic started. Even though private label securities do not carry government guaranty of principal and interest payments to investors, they are still appealing because they often offer higher yields than bonds issued by the GSEs.
To learn how the new GSE caps impact homeowners’ access to credit, check out this SFA blog post.