Prime jumbo new-issuance market heating up for March

Deal size: $373 million
Pool: 475 loans
Avg. Balance: $785,299
WA FICO: 774
Closing date: March 18

Woodward Capital Management, a Detroit-based real estate development and management firm and private-label MBS issuer, is sponsoring its third overall offering of prime jumbo loans backing 38 classes of amortizing and interest-only senior and subordinate notes.

The 30-year prime loans in the pool underwritten by Quicken Loans. Quicken is the flagship business of another Detroit firm, finance holding company Rocket Companies (NYSE: RKT).

The retail-channel loans are primarily residential (97.2% of the pool balance), and are designated as safe-harbor qualified mortgages under the Consumer Financial Protection Bureau’s ability-to-repay standards.

The loans, which will be serviced by Quicken, are seasoned an average of 3.4 months, a shorter period than other pier prime jumbo issuers.

About 28.2% of the pool is concentrated in California.

Fitch Ratings and Moody’s Investors Service have assigned preliminary ratings to the deal. Moody’s has applied an Aaa rating to 12 classes of super senior notes, including a $317.1 million tranche with an assumed coupon of 2.5%. Fitch was tasked with rating four of the top AAA note classes. Both agencies have signed double-A and single-A ratings to subordinate and interest-only classes in the deal.

The RCKT 2021-1 deal was underwritten by BofASecurities, and is expected to close March 18.

Of note:Fitch stated a unique stop-advance feature of the deal regarding advances required on delinquent loans past 120 days. Unlike other RMBS transactions rated by Fitch, the report stated, the RCKT deal will allocate liquidation proceeds to overdue interest before principal, which reduces the risk of permanent interest deductions for some bond tranches under high-stress modeling scenarios incorporated by Fitch.

Deal size: $348.5 million
Pool: 381 loans
Avg. Balance: $914,644
WA FICO: 778
Closing date: March 25

The deal is the second prime-jumbo offering of the year for Redwood Trust, a publicly traded real estate investment trust company (NYSE: RWT). Redwood’s RWT Holdings Inc. priced a $527.4 million bond sale in February on the Sequoia trust platform, and had five MBS deals last year.

For the new transaction, acquired the loans from 65 lenders. PrimeLending (10.3%), Googain (7.1%), Supreme Lending (5.7%) and Fairway Independent Mortgage (5.6%) are the top four originators.

The loans will back seven tranches of notes including a $296.2 million super-senior tranche that makes up 85% of the note balances. The super-senior notes are supported by 15% initial credit enhancement. Kroll Bond Rating Agency and Fitch have assigned early AAA ratings to the senior tranches of the deal.

The loans will be serviced by NewRez’ Shellpoint Mortgage Servicing and Select Portfolio Select Portfolio Servicing.

Wells Fargo is the lead underwriter.

Of note:The 19.7% concentration of self-employed stated-income borrowers in the deal is slightly lower than the average prime RMBS shelf since 2020, according to Kroll. Sequoia also features borrowers with higher levels of monthly residual income ($13,763) and liquid reserves ($493,711) than peer prime jumbo issuers including JPMorgan, Morgan Stanley and Wells Fargo.

Deal size: $404.1 million
Pool: 390 loans
Avg. Balance: $1,036,101
FICO: 778
Closing date: March 29

Wells Fargo is pursuing its 12^thpost-crisis RMBS securitization of its own retail-channel originations, securing the issuance of 20 tranches of senior notes 11 corresponding interest-only tranches attached to the senior stack, and six classes of subordinate notes. .

Wells Fargo Mortgage Backed Securities Trust 2021-1 (WFMBS 2021-1) is a prime RMBS transaction comprising 390 residential mortgages with an aggregate principal balance of $404.1 million, according to presale reports from Kroll and S&P Global Ratings.

According to Kroll, the average FICO of 779 (778, according to S&P's report) is greater than the average prime RMBS average of 770 over 2020 and 2021. All of the loans were issued after the onset of the COVID-19 outbreak in the U.S. a year ago.

Of note:Only 55.1% of the properties have had full appraisals, due to the bank’s suspension of interior inspections during underwriting to adhere to COVID-19 safety protocols. While Fannie Mae and Freddie Mac guidelines only require exterior-only look-throughs to qualify as full appraisals during the pandemic, Wells Fargo’s own guidelines for non-conforming originations require lower loan-to-value ratios for similar designation, according to S&P.