CarVal Investors, which made its debut in the securitization market just last month, is back with a second helping of bonds backed by reperforming mortgages.

The alternative investment fund manager will offer notes backed by a $272 million pool of mortgages via Mill City Mortgage Loan Trust 2015-2, according to Fitch Ratings.

CarVal is an independent subsidiary of Cargill, and has two main business units — Credit Funds and Real Estate Funds. The firm is headquartered in Minneapolis, with five additional offices in London, New York, Paris, Luxemburg and Singapore. As of October 2015, its assets under management totaled approximately $10 billion.

Mill City 2015-2 is backed primarily by loans that have been modified and are now paying on time, similar to CarVal's first deal. Of the 887 loans in the pool, 80.4% have been modified, the majority of them more than two years ago. Half of the loans in the collateral pool have experienced a delinquency in the past 36 months and 15% of the loans experienced a delinquency in the past 24 months.

The rest of the loans have demonstrated a consistently improved payment pattern, including rate reductions, term extensions and deferrals, over a 24-month period.

Loans have a current weighted average FICO of 702 and a weighted average loan-to-value ratio of 85.

The pool consists of 48% fixed-rate mortgages and 52% hybrid adjustable-rate mortgages. These variable interest rate loans adjust periodically after a fixed period; 24% of the pool is comprised of loans that allow borrowers to pay interest that is less than the total owed. The deferred interest amount averages $53,699 per loan. Fitch included the deferred amounts when calculating the borrower's LTV, despite the lower payment and amounts not being owed during the term of the loan.

"The inclusion resulted in higher probability of default and loss severity than if there were no deferrals," stated Fitch.

Shellpoint Mortgage Servicing or Fay Servicing service all the loans in the pool.

Fitch assigned preliminary AAA ratings to the senior notes, which benefit from 38.5% credit enhancement.

At the subordinate level, the ratings agency assigned preliminary AA ratings to the class M1 notes that benefit from 30.65% credit enhancement, BBB ratings to the class M3 notes that benefit from 19.5% credit enhancement, BB ratings to the class B1 notes that benefit from 14.42% credit enhancement and B ratings to the class B2 notes that benefit from 10.88% credit enhancement.

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