MBS

Lenders financed the properties through first-lien, fixed-rate mortgage loans, most of which were on 30-year terms extended to prime borrowers, many self-employed.

Anticipation of the Federal Reserve’s balance-sheet reduction is weighing on bonds backed by mortgages, but the actual event may make them an attractive alternative to corporate debt.

Only about 1.0% of the mortgage assets in the collateral pool are for the respective borrowers’ personal use, and qualify as mortgages under Regulation Z.

Secured by a single Morgan Stanley first-lien mortgage, the SFR is the largest deal since the program priced its $2 billion transaction in July 2021.

Non-QM assets overlap almost perfectly with the portion of loans, 52%, financing properties where the borrower intends to maintain as a primary residence.

The current program, which included more than 580 separate operations to buy Treasuries and 1,200 to purchase mortgage-backed securities, has dwarfed all three of the Fed’s previous quantitative-easing programs combined.

Athas Capital Group originated the mortgages, which have an average balance of $408,350, and an average weighted average (WA) original term of 362 months.

About 58.1% of the loans are in California, while two California cities -- Los Angeles and San Diego -- make up the pool’s largest MSA concentrations.

If the minimum CE test or the delinquency test is not satisfied, then 100% of the scheduled and unscheduled principal will be allocated to the senior tranche.

Performing and re-performing loans are in the pool, as well as fixed, adjustable-rate and step-rate loans, and fully-amortizing balloon and interest-only mortgages.