A recent Credit Suisse jumbo residential mortgage-backed securities deal bears out
The rep and warrant features on the deal, CSMC Trust 2013-IVR4, are “consistent with CSMC 2013-IVR1, CSMC2013-IVR2 and CMSC 2013-IVR3, and of stronger quality than that of two previous Credit Suisse prime jumbo transactions,” DBRS said in a report Monday.
“However, the relatively weak financial strength of certain originators coupled with the sunset provisions on the backstop by [the seller and Credit Suisse subsidiary DLJ Mortgage Capital Inc.] still demand additional penalties and credit enhancement protections.”
DBRS assigned its top rating to 78 classes of the transaction reflecting 7.5% credit enhancement due to subordination. This group includes super-senior classes that carry additional protection from three classes of senior support bonds, interest-only certificates and exchangeable certificates.
Four classes received lower investment-grade rates of AA, A and BBB, respectively, reflecting 6.1%, 4.45% and 2.75% credit enhancement. One class received a speculative grade BB rating, reflecting 1.3% credit enhancement.
According to DBRS, “The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a traditional one.”
The trust contains a portfolio of prime credit loans originated by Caliber Funding LLC (15.4%), Guaranteed Rate Inc. (14.4%), Quicken Loans Inc. (12.3%), First Republic Bank (9.7%), Skyline Financial Corp. (6.5%), PHH Mortgage Corp. (6.3%) and various other originators (30.2%).
The traditional life-time reps and warrants the originators provide to the trust are backstopped for all the originators except PHH by DLJ in the event of an originator’s bankruptcy or insolvency “and if the originator fails to cure, repurchase or substitute.”
But DBRS added that “such a backdrop is subject to certain sunset provisions that give considerations to prior loan performance” in the event of a breach of representations.
The enforcement mechanism for breaches “includes automatic breach reviews by a third-party reviewer for any seriously delinquent loans and resolution of disputes are ultimately subject to determination in an arbitration proceeding.”
The servicers are Select Portfolio Servicing Inc. (84%), First Republic (9.7%) and PHH (6.3%). Wells Fargo Bank is acting as the master servicers and securities administrator. Christiana Trust, a division of Wilmington Savings Fund Society FSB, will serve as trustee.
