1. Economic Outlook Remains Positive
Despite 4Q18 volatility and 1Q19 government disruption, the economic outlook for 2019 remains positive. While growth is expected to ease compared to a more robust 2018, key indicators still point to a solid performance.
2. Healthy Consumer Credit
Tight labor markets, highlighted by low unemployment, strong job creation and accelerating wage growth, support healthy consumer credit fundamentals in 2019. Plus, consumers have meaningfully reduced their household debt-to-income since the financial crisis, placing them on more solid footing.
3. Growth in RMBS
New-issue RMBS reached a post-crisis record last year with even more growth expected in 2019—especially in the non-prime and non-qualified mortgage space. More originators are moving into closed-end second mortgage and HELOC issuance amid rising interest rates and elevated home equity.
4. Continued Home Price Acceleration
While home price growth has been decelerating, home prices have continued to rise nationally on a year-over-year basis. Home price appreciation is forecast to continue in 2019.
5. New Technology
Blockchain and artificial intelligence are the leading technologies powering innovation in the structured finance industry. Blockchain is a system of storing digital information in an encrypted and distributed way. Artificial Intelligence employs predictive analytics to carry out intelligent tasks in real-time. Combined, the two technologies can manage immense databases, strengthen cyber-security protocols, and make the most profitable decisions in a fraction of the time.