A pool of 2,085 first-lien home loans will back about $1.5 billion in mortgage-backed notes from sponsor VMC Asset Pooler, to be issued to investors through the issuer Verus Securitization Trust, series 2026-7.
Fixed-and adjustable-rate mortgages, which ranged in quality from expanded prime to non-prime, are in the collateral pool, according to Morningstar DBRS. They support class A, notes, which includes a first cash flow (FCF) and a last cash flow (LCF) tranche; a mezzanine tranche and three class B notes, according to DBRS.
Verus 2026-7's mortgage notes have a final scheduled payment date of September 2071, according to DBRS.
All the class A notes received a (P) AAA (SF) rating from DBRS, analysts said. The most senior tranche, class A-1A, benefits from credit enhancement levels of 33.30%, while classes A-1B through A-1F all have credit enhancement levels of 23.30%, DBRS said.
Wells Fargo Securities leads a group of initial purchasers bringing the deal to market, a list that includes Barclays Capital, BNP Paribas Securities,
All the class A notes are expected to repay investors on a pro rata basis, while the mezzanine and subordinate classes will repay investors sequentially, DBRS said.
Non-qualified mortgages account for 23.1% of the asset pool, by balance, and 43.4% of the loans in the pool were made to investors for business purposes and are exempt from the Ability-to-Repay rules of the Consumer Financial Protection Bureau, the rating agency said.
Various originators made the home loans, with each accounting for less than 10.0% of the mortgage loans, DBRS. NewRez, doing business as Shellpoint, will service 60.7% of the mortgages in the pool, while Cornerstone Servicing will service 39.3% of the pool.
The capital structure confers subordination to the transaction, which provides the credit enhancement to the deal, according to DBRS.
On average, the loans in the pool had a balance of $545,988. On a weighted average (WA) basis, the home loans had a coupon of 7.2%, a FICO score of 741 and an original, cumulative loan-to-value of 70.8%.
As for the underlying borrowers, almost half of them are self-employed, 49.4%. They had an income of $854,088 and liquid reserves of $326,065, DBRS said. Aside from the class A notes, ratings ranged from (P) AA (sf) on the class A-2 notes through (P) B (sf) on the class B2 notes.
