Donna M. Mitchell

Second-lien loans make up virtually the entire pool, which carries some risk of poor recovery rates. Yet 78% of the pool is also considered safe-harbor mortgages.

Excess cash flow will pay timely interest and protect against realized losses in the rated certificates before being paid out to the class X notes.

Investment properties are the primary properties backing the collateral pool, at 80.3%, while second homes account for 19.7% of the pool.

The deal has a step-up coupon feature that calls for the fixed rates on classes A1, A2 and A3 to increase by 100 basis points, subject to the net weighted average coupon (WAC) after four years.

A vast majority of the collateral pool balance, 82.6%, are mortgages used to purchase primary residences, and just 17.4% finance second homes.

Alternative documentation accounts for 37.9% of the pool balance, compared with 24.6% on the 2024-NQM4 deal.

Underwriting methods have been steadily shifting to traditional full documentation, which accounts for 13.3% in the VERUS 2024-9, KBRA said, its largest share since VERUS 2024-6.

The notes benefit from credit enhancement levels of 30.45%, 24.3%, 13.8%, 8.65%, 5.00% and 2.05% on the A1, A2, A3, M1, B1, B2 and B3 tranches, respectively.

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The notes receive credit enhancement from overcollateralization, and an initial reserve.

The deal will repay investors on a hyrid pro rata, sequential basis. Credit enhancement ranges from 51.7% on the class A1A notes to the 2.25% on the class B2 notes.

This is the first RTL transaction for Roc360 Real Estate Income Trust, the deal's sponsor, in three years. Also, it is Roc360's first rated RTL transaction.

Underlying borrowers have accumulated significant amount of home equity in their homes, to a weighted average (WA) original cumulative loan-to-value (CLTV) ratio of 69.5%.

In the non-prime pool, owner-occupied properties account for most of the assets, at 55.1%; the amount of investor properties represents 41.6% of the deal.

A trigger occurs if the reserve fund is less than 50% of the reserve fund target amount, or if the payment date where the outstanding HEA valuation is less than 80% of the starting home valuation.

Pricing talk includes yields ranging from 4.9% on the AAA, class A1 notes; 5.7% on the AA, class A2 notes; and 6.2% on the AA M1 notes.

Yields are expected to range from 5.75% on the A1A notes to 6.55% on the M1, all priced on the three-month, interpolated yield curve.

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The mortgages have an average balance of $70,312, and an average coupon, on a weighted average (WA) basis, of 10.06%. Also on a WA basis, the borrowers have an original credit score of 739.