Aftershock: The Effect of the Pandemic on Mortgage Securitization

An unexpected result of the COVID-19 pandemic was the resurgence of private-label securitization (PLS) in 2021. This article reviews the effect of the two-year pandemic on single-family mortgage volume and performance with a focus on PLS and a view into some of the lasting impacts. PLS issuance in 2021 was the largest since 2007, with four-fifths backed by prime jumbo and Alt-A non-QM product. Fast-rising home prices expanding the jumbo loan population and record low mortgage rates triggering a refinance boom and pay-off acceleration supported new issuance. Although borrower financial distress precipitated a spike in delinquency rates, delinquencies at the end of 2021 were generally below levels two years earlier except for long-term delinquency (more than fifteen months past due). PLS delinquency varies substantially across the nation, with states hit particularly hard by the pandemic, recession, and natural hazards having serious delinquency rates of more than 25% above the national level.