NEW YORK–(BUSINESS WIRE) – The Kroll Bond Rating Agency (KBRA) publishes a study on the dynamics of the US residential mortgage sector. The report summarizes the changing landscape of mortgage financing, noting the rise of non-bank mortgage lenders, and an overview of the various business activities related to the raising (or production) of home loans and servicing. The report also examines key elements related to servicing GNMA loans (e.g. FHA loans).
KBRA believes that the non-bank residential mortgage sector has undergone significant fundamental changes since the global financial crisis, resulting in more robust credit profiles based on greater revenue diversification and economies of scale, as well as regulatory risk management practices. In our view, these factors, combined, should serve to reduce the occasionally significant volatility in earnings that has historically been observed. However, KBRA recognizes that the wealth of the sector will remain closely tied to the path of interest rates, which are extraordinarily difficult to predict. In addition, despite the prospect of more balanced capital structures with somewhat less reliance on short-term and market-driven debt, the US residential mortgage sector continues to be largely funded by market-sensitive secured debt. As a result, the sector will generally have a lower quality rating than other financial sectors, such as deposit-financed commercial banks.
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KBRA is a US, EU and UK registered full service rating agency providing structured financial ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple countries.