A weakening housing sector and subprime mortgage market deterioriation resulted in mortgage securitizations dropping 23% in the third quarter, totaling approximately $476.6 billion in securities sold to investors, according to the Securities Industry and Financial Markets Association's (SIFMA) latest Research Quarterly report.
‘As anticipated, much weaker market conditions are affecting issuance volumes, and we expect economic growth to continue at a below-trend rate,’ said Michael Decker, senior managing director for research and public policy at SIFMA, in a press release. ‘Global demand and employment and income gains are compensating for some of the difficulties in the housing sector, but fragile credit market conditions will persist, affecting issuance and demand into 2008.’
The report noted that issuance of federal agency long-term debt totaled $685.0 billion in the first three quarters of 2007, while total non-agency mortgage-backed securities (MBS) issued during the first nine months of the year increased to $603.4 billion, due in large part to a still-healthy commercial MBS market. Third-quarter non-agency volume still decreased, however, and the SIFMA report found that September's $26.7 billion non-agency issuance was "well below" the average volume in July and August.
The Research Quarterly also referred to the 2006 mortgage vintage as ‘look[ing] to be one of the weakest ever,’ adding that October's large volume of adjustable-rate mortgage resets contributed to the mortgage sector exposure. Residential MBS new-issue volume decreased to $419.6 billion in the first nine months, down from $448.9 billion in the same period last year, and third-quarter issuance was $140.7 billion compared to $115.4 billion in the second quarter and $147.2 billion from a year ago, the report found.
The complete report is available at www.sifma.org/research/pdf/Research-Quarterly-1107.pdf