Demand for private-label mortgages on the rise

More than $42 billion in issuance last quarter nears post-crisis record

National /
Aug.August 23, 2021 12:15 PM
From left: JPMorganChase CEO Jamie Dimon, Goldman Sachs CEO David Solomon and Morgan Stanley CEO James Gorman (Getty)

From left: JPMorganChase CEO Jamie Dimon, Goldman Sachs CEO David Solomon and Morgan Stanley CEO James Gorman (Getty)

After virtually disappearing following the financial crisis more than a decade ago, private-label mortgages are back.

Private-label mortgages are loans bought and sold without the backing of government guarantors. Last quarter, more than $42 billion in private-label mortgages were issued, the most since the pandemic and one of the biggest quarters since the 2008 financial crisis, according to the Wall Street Journal.

Private-label mortgages still aren’t a large swath of the mortgage market, making up just 4 percent of mortgage bonds in the second quarter. The market is dominated by the government players, Freddie Mac and Fannie Mae, which guarantee investors get paid.

But private-label mortgages are able to make loans Freddie Mac and Fannie Mae won’t typically touch, including investment properties and those from self-employed borrowers. The market is expected to keep on growing, with Goldman Sachs and Morgan Stanley jumping into the market.

JPMorganChase is another major player in private-label mortgages. Earlier this year, the bank invested in Manex, a platform that connects buyers and sellers of mortgages that can be sold to financial firms and packaged into bonds.

Private-label mortgages often offer higher yields than government lenders because they don’t come with a guarantee that investors get paid. These bonds were deemed too risky and a bogeyman of the recession in 2008 and 2009, but began surging again prior to the pandemic.

Earlier this year, the government capped how many vacation and second-home mortgages could be purchased by Freddie Mac and Fannie Mae, helping to fuel the private-label mortgage business.

[WSJ] — Holden Walter-Warner





    Related Articles

    arrow_forward_ios
    Sheldon Solow and the Hamptons estate (Getty, Douglas Elliman)
    Sheldon Solow’s Hamptons home gets $10M price cut
    Sheldon Solow’s Hamptons home gets $10M price cut
    Investors home purchases rose to 15 percent in the second quarter, a year-over-year increase of 3.9 percentage points. (iStock)
    Investors take bigger bite of US housing, and pay less
    Investors take bigger bite of US housing, and pay less
    Chicago Bulls’ DeRozan buys mansion from Michael Jordan’s ex-wife at discounted $4.5M
    Chicago Bulls’ DeRozan buys mansion from Michael Jordan’s ex-wife at discounted $4.5M
    Chicago Bulls’ DeRozan buys mansion from Michael Jordan’s ex-wife at discounted $4.5M
    Existing home sales were on the upswing in September following a slight dip in August. (iStock)
    Existing home sales rebound in September, rising by 7%
    Existing home sales rebound in September, rising by 7%
    Prices for the few homes in Fairfield are still going up (iStock)
    Few listings, sustained demand keeps Fairfield home prices near record highs
    Few listings, sustained demand keeps Fairfield home prices near record highs
    520 Park Ave and Gil Agmon (Getty, Delek Motors, Robert A.M. Stern Architects)
    After split, 520 Park sponsor unit sells to Israeli automotive exec for $36M
    After split, 520 Park sponsor unit sells to Israeli automotive exec for $36M
    The Princeton Club flag in front of 15 West 43rd Street (Google Maps)
    Paper Tigers: Princeton Club defaults on $39M mortgage, may lose digs
    Paper Tigers: Princeton Club defaults on $39M mortgage, may lose digs
    56 Leonard, PH 58 (Getty, Sotheby's)
    $30M unit latest in string of deals at ‘Jenga Tower’ as record sale looms
    $30M unit latest in string of deals at ‘Jenga Tower’ as record sale looms
    arrow_forward_ios

    The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

    Loading...