Prepayment activity also increased, with conditional prepayment rates reaching 14.1%, while conventional mortgage rates fell to the low to mid-6% range and non-QM weighted average coupons fell to the mid-7% range.
Deal level performance remained broadly stable. Credit improvement continued to accelerate as losses remained low. Industry analysts said the sector’s performance was affected by a “stalled” macroeconomic environment as the unemployment rate rose to 4.3% in August, the highest level since 2021. The unemployment rate is still relatively low by historical standards, compared to 4.1% at the end of the second quarter.
But the report also noted that the broader economy recovered, with gross domestic product improving from a 0.6% decline in the second quarter to a 3.8% increase in the third quarter. Inflation remained stable at an annual rate of 2.78%, based on the consumer price index.
Housing market activity remained subdued. Annual sales of existing homes amounted to just over 4 million units, comparable to last year, but still at a historically low level. New home sales showed modest improvement from the previous quarter and year, although full September data was not yet available.
Conventional mortgage volumes were broadly in line with the same period in 2024. Despite subdued economic and housing fundamentals, the report notes that non-QM RMBS structures continued to demonstrate resilience, with collateral characteristics consistent with issuer trends.
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