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Current US consumer and
housing landscape
3
On average, households are on solid footing
Sources: U.S. Board of Governors of the Federal Reserve System; U.S. Bureau of Labor Statistics; U.S. Bureau of Economic Analysis; Moody’s Investors Service
$80,000,000
$90,000,000
$100,000,000
$110,000,000
$120,000,000
$130,000,000
$140,000,000
$150,000,000
2014Q
1
2014Q
2
2014Q
3
2014Q
4
2015Q
1
2015Q
2
2015Q
3
2015Q
4
2016Q
1
2016Q
2
2016Q
3
2016Q
4
2017Q
1
2017Q
2
2017Q
3
2017Q
4
2018Q
1
2018Q
2
2018Q
3
2018Q
4
2019Q
1
2019Q
2
2019Q
3
2019Q
4
2020Q
1
2020Q
2
2020Q
3
2020Q
4
2021Q
1
2021Q
2
Mill
ions
Rise in Household Net Worth
11.00
11.50
12.00
12.50
13.00
13.50
14.00
14.50
15.00
15.50
Household Financial Obligations Ratio
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Dec-1
3
Mar-
14
Jun
-14
Se
p-1
4
Dec-1
4
Mar-
15
Jun
-15
Se
p-1
5
Dec-1
5
Mar-
16
Jun
-16
Se
p-1
6
Dec-1
6
Mar-
17
Jun
-17
Se
p-1
7
Dec-1
7
Mar-
18
Jun
-18
Se
p-1
8
Dec-1
8
Mar-
19
Jun
-19
Se
p-1
9
Dec-1
9
Mar-
20
Jun
-20
Se
p-2
0
Dec-2
0
Mar-
21
Jun
-21
Se
p-2
1
ECI wage growth - All workers: QoQ Ann.
0
5
10
15
20
25
30
35
40
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000Personal saving Savings Rate
Personal Savings $ (Mil) and %
4
Since the start of the pandemic, all households have experienced solid
increases in net worthChange in net worth by distribution
Index 2019 Q4 = 100
Sources: U.S. Board of Governors of the Federal Reserve System; Moody's Investors Service Sources: U.S. Board of Governors of the Federal Reserve System; Moody's Investors Service
Year-over-year change in net worth by distribution
85
90
95
100
105
110
115
120
125
130
2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2
80 - 99 percentile 60 - 80 percentile 40 - 60 percentile20 40 percentile 0 - 20 percentile
0%
5%
10%
15%
20%
25%
30%
80 - 99 percentile 60 - 80 percentile 40 - 60 percentile20 40 percentile 0 - 20 percentile
5
Job growth accelerated in October; however, labor supply issues are
holding back job growth
Sources: U.S. Bureau of Labor Statistics (BLS); The Conference Board; Moody’s Investors Service
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1/0
7
6/0
7
11/0
7
4/0
8
9/0
8
2/0
9
7/0
9
12/0
9
5/1
0
10/1
0
3/1
1
8/1
1
1/1
2
6/1
2
11/1
2
4/1
3
9/1
3
2/1
4
7/1
4
12/1
4
5/1
5
10/1
5
3/1
6
8/1
6
1/1
7
6/1
7
11/1
7
4/1
8
9/1
8
2/1
9
7/1
9
12/1
9
5/2
0
10/2
0
3/2
1
8/2
1
Job openings rate - Total nonfarm, (%, SA) Quits rate - Total nonfarm, (%, SA)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1/0
7
6/0
7
11/0
7
4/0
8
9/0
8
2/0
9
7/0
9
12/0
9
5/1
0
10/1
0
3/1
1
8/1
1
1/1
2
6/1
2
11/1
2
4/1
3
9/1
3
2/1
4
7/1
4
12/1
4
5/1
5
10/1
5
3/1
6
8/1
6
1/1
7
6/1
7
11/1
7
4/1
8
9/1
8
2/1
9
7/1
9
12/1
9
5/2
0
10/2
0
3/2
1
8/2
1
Number of job openings to number of unemployed
-20
-10
0
10
20
30
40
50
1/19 3/19 5/19 7/19 9/19 11/19 1/20 3/20 5/20 7/20 9/20 11/20 1/21 3/21 5/21 7/21 9/21
Labor market differential: jobs plentiful - jobs hard to get
% of respondents who reported jobs were plentiful minus the number
who reported jobs were hard to get
The ratio of job openings to unemployed declined very slightly and
remains above pre-pandemic highs
Job openings rate versus quits rateMonthly change in employment by sector - (Thousands #, SA)
-
200
400
600
800
1,000
1,200
Total Nonfarm [100.0%] Total private [85.0%] Goods Producing [13.9%] Private Service Providing [71.2%]
7/31/2021 8/31/2021 9/30/2021 10/31/2021
6
While moderating, home price appreciate continues to be very high
Sources: S&P CoreLogic Case-Shiller Home Price Indices, Moody's Investors Service Sources: S&P CoreLogic Case-Shiller Home Price Indices, Moody's Investors Service
0
5
10
15
20
25
1/17 3/17 5/17 7/17 9/17 11/17 1/18 3/18 5/18 7/18 9/18 11/18 1/19 3/19 5/19 7/19 9/19 11/19 1/20 3/20 5/20 7/20 9/20 11/20 1/21 3/21 5/21 7/21 9/21
Case-Shiller® 20-metro home price index, SA)
-20
-10
0
10
20
30
40
50
60
1/17 3/17 5/17 7/17 9/17 11/17 1/18 3/18 5/18 7/18 9/18 11/18 1/19 3/19 5/19 7/19 9/19 11/19 1/20 3/20 5/20 7/20 9/20 11/20 1/21 3/21 5/21 7/21 9/21
CS- Atl (NSA) CS- Dal (NSA) CS- LA (NSA) CS- Mia (NSA) CS- NY (NSA) CS- SF (NSA)
Annualized monthly over month change in home prices
Path forward from
unprecedented forbearance
8
Mid
-2021
9
Mid
-2021
10
Mid
-2021
11
Mid
-2021
12
13
14
15
16
17
18
19
RMBS credit implications
21
Proportion of
Non-cash
flowing loans in
Prime/GSE
CRT deals
continue to
trend down as
forbearance
plans expire0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21
CP
R
GSE CRT performance
60+ Delinquency Non-Cash Flow % CPR
0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%55.0%60.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21
CP
R
Prime jumbo 2.0 performance
60+ Delinquency Non-Cash Flow % CPR
Sources: Moody’s Investors Service and Moody's Analytics Structured Finance Data Portal
22
Improvement in NCF
levels much less
pronounced in RPL
and Legacy RMBS
reflective of weaker
collateral quality
Borrowers enrolled in
forbearance plans for an
extended periods will likely
need a modification to
payment terms increasing
risk of interest shortfalls and
modification losses
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21
CP
R
RPL performance
60+ Delinquency Non-Cash Flow % CPR
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21
CP
R
Legacy RMBS performance
60+ Delinquency Non-Cash Flow % CPR
Sources: Moody’s Investors Service and Moody's Analytics Structured Finance Data Portal
23
Deferrals and modifications expose RMBS to risks
Risk Legacy Prime jumbo 2.0 RPL GSE CRT
Realized losses from
deferrals or modifications
Transaction documents
silent on the treatment of
deferred balances
Immediately recognizing
deferrals as realized losses
can benefit senior bonds
Documents typically require
immediate loss recognition
for deferred balances
Immediately recognizing
deferrals as realized losses
can benefit senior bonds
Treatment of deferred balances
varies by deal
Immediately recognizing
deferrals as realized losses can
benefit senior bonds
Actual loss deals: Principal and
interest modifications cause
modification losses, but not
deferrals
Fixed severity deals: No losses
from modifications or deferrals
Risk of interest shortfalls
(ISF)
Recoupment of servicer
advances can result in:
➢ Alt-A/Subprime:
Permanent ISF in deals
with separate waterfalls
for P&I and weak
reimbursement structures.
➢ Prime Jumbo:
Subordinate write-downs
and temporary ISF in
deals with combined P&I
waterfall
Recoupment of servicer
advances can result in:
➢ Subordinate write-downs
and temporary ISF in deals
with combined P&I
waterfall
➢ Most deals have no servicer
advancing so risk of ISF has
been receding as level of
NCF loans decline
➢ In deals with servicer
advancing, risk of
subordinate write-downs and
temporary ISF as servicers
recoup advances following a
modification.
➢ GSEs pay bond interest; no
risk of interest shortfalls related
to advance recoupment
Overall effective at mitigating defaults, deferral and modifications pose other risks
Financial institution impacts
25
Note: The YoY change in charge-offs for Q2 and Q3 2021 are versus Q2 and Q3 2019Sources: Company disclosures, Moody’s Investors Service
Charge-offs averages
large bank lenders
-0.50%
-0.30%
-0.10%
0.10%
0.30%
0.50%
-0.50%
-0.30%
-0.10%
0.10%
0.30%
0.50%
Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021
Averages - YoY Change (LHS) Averages Actual (RHS)
Banks’ residential mortgage asset quality will deteriorate very modestly;
banks continue to lose market share to non-bank mortgage companies
-12%
-10%
-8%
-6%
-4%
-2%
0%
3-yrCAGR -2Q21 vs.
2Q18
4Q20 YoY 1Q21 YoY 2Q21 YoY 3Q21 YoY
Year-over-year change in balances
averages large lenders
Additional material
27
Forbearance stock not standalone threat to housing
Payment relief was widespread, but overhang alone not risk for prices/credit
Sources: Mortgage Bankers Association, National Association of Realtors, Census Bureau, Moody’s Analytics, and Moody’s Investors Service
28
29
30
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