Non-owner-occupied and agency-eligible mortgage loans will compose the collateral mix in the CSMC 2021-INV1 Trust, a mortgage-backed securities deal that will raise about $278 million from the capital markets.
DLJ Mortgage Capital is sponsoring the deal. The collateral pool consists of 845 fixed-rate mortgages. Investment property loans make up a large majority of the collateral pool, 85.2%, while second home mortgages comprise 14.8% of the pool, according to Kroll Bond Rating Agency.
Loans in the pool have an average balance of $329,000; have a weighted average (WA) original loan-to-value of 62.5%, and a WA original FICO score of 772. The loans adhered to an underwriting standard that is fully documented, and so the collateral is considered prime.
In terms of geographic concentration, California represents 42.7% of the loans in the pool. Texas has the next highest concentration of loans, with 7.7%, and Colorado represents 5.6%. Among central-business statistical areas, Los Angeles represents 18.4%, followed by San Jose, with a 6.1% share of the underlying collateral.
The deal takes advantage of a shift in federal rules governing the limits on how much non-owner-occupied loans Fannie Mae and Freddie Mac can purchase. In January 2021, certain rule set that limit for the government-sponsored entities to 7%, sending originators looking for alternative sources of financing, KBRA explained.
Before those revisions, non-owner occupied mortgage loans made up a very modest amount of private-label securities. The changes might change that, as more borrowers seeking financing search for alternate sources to replace the reduced PLS ratio.
KBRA expects to assign a ‘AAA’ rating to the super senior tranche of notes and the senior support tranche; a ‘AA+’ and ‘A+’ rating to the class B-1 and B-2 notes, respectively; and ‘BBB+’, ‘BB+’, and ‘B+’ to the subordinate tranches of notes.
