The issuance of securities backed by riskier U.S. mortgages nearly doubled year-over-year in the first quarter of 2018, rising from $666 million in Q1 2017 to $1.3 billion in Q1 2018. Over $4.1 billion of securities backed by “subprime” mortgage loans were issued in the last year, according to figures from Inside Mortgage Finance, with numbers rising in the last months of the year.

While pre-recession subprime lending practices have been blamed for the global financial collapse, some analysts say that modern deals are safer than those issued a decade ago. Under Dodd-Frank reforms, which took effect in 2015, riskier mortgage-backed sponsors have to retain at least 5% interest in the pools of loans they offer. Mortgage lenders have also had to take account of every borrower’s ability to repay a loan since 2014.

Even so, the new regime seems to be allowing loans to reach borrowers with limited room for manoeuvre. DBRS, another rating agency, notes that some non-QM MBS deals have featured borrowers with scores as low as 500 on the 300-850 "Fico" scale, which is deep into subprime territory.

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