OUTLOOK CONNECTIONS

Inside this episode:

Barbara Rismondo of the Structured Finance team, Warren Kornfeld of the Banking team, Florence Zeman of the Public Finance team and Natalia Gluschuk of the Corporates team discuss the 2021 outlook for sectors exposed to the US and European housing markets. US nonbank mortgage lenders and homebuilders will report good profitability owing to government stimulus, while US housing finance agencies and European and US residential mortgage-backed securitizations will experience moderately higher delinquencies amid higher unemployment.

Related content:

• State housing finance agencies – US: 2021 outlook stable as loan sales offset forbearance and lower investment income -The outlook for state housing finance agencies (HFAs) remains stable as increased loan sales on the secondary market will preserve fiscal year 2021 margins.
• Homebuilding and Building Materials – US 2021 Outlook- Strong home demand and a low supply boost US homebuilders. Building materials companies also benefit, but would do better should Congress pass infrastructure spending legislation.
• Non-bank mortgage companies – US: Outlook revised to positive from negative as strong profitability replenishes capital - Non-bank mortgage companies had very strong Q2 - Q3 profitability, after a difficult first quarter, which has helped improve their capitalization and led to the change in outlook to positive.
• RMBS – US: 2021 Outlook – COVID-19 fallout will drive originators to uphold high standards, but weaken existing deals' performance - Industry responses to COVID-19 will support strong credit quality for new RMBS in 2021, while performance weakens for existing transactions.
• RMBS and ABS – EMEA: 2021 Outlook — Tight underwriting will aid new deal asset quality as coronavirus fallout spurs performance risks - Pandemic fallout will remain evident in 2021 throughout Europe's structured finance sector, driving most underwriters to maintain strict standards.
• Housing – Europe: COVID-19 accelerates housing market trends, exacerbating wealth inequalities - Even though house prices will decline, housing affordability will worsen for many prospective home buyers in the aftermath of COVID-19, because of lower incomes and reduced access to finance.
• Housing – US: Urban markets will recover after pandemic as Americans' housing decisions evolve - Impacts on housing from the pandemic will range from increased remote working and municipal budget squeezes to low borrowing costs and potential health concerns.