New Residential Investment Corp. is readying an offering of bonds backed by both reperforming and nonperforming mortgages, according to DBRS, a rating agency.

Like the real estate investment trust’s previous transactions, the collateral for New Residential Mortgage Loan Trust 2017-1 was acquired by exercising cleanup calls on older, private-label securitizations that it services. This typically happens when at least 90% of the collateral for the older deals has been paid down, making them uneconomical to service.

It purchases the loans collateralizing the old bonds, then bundles them into collateral for new deals.

NRZLT 2017-1 is backed by 6,544 loans with a total principal balance of $756,694,458. The loans are significantly seasoned with a weighted-average age of 161 months. Ninety-four percent of the pool is current and 5% is 30 days delinquent, and 1% is in bankruptcy. Approximately 76.5% and 83.8% of the loans have been making timely payments for the past 24 months and 12 months, respectively.

Approximately 25% of the loans have been modified; the majority of them more than two years ago.

As a result of the seasoning of the collateral, none of the loans are subject to the Consumer Financial Protection Bureau’s Ability-to-Repay or Qualified Mortgage rules.

DBRS expects to assign AAA ratings to the senior notes to be issued in the new transaction, which benefit from 16.05% credit enhancement.

Just over 61% of the pool is serviced by Ocwen Loan Servicing and 38.9% by Nationstar Mortgage. Nationstar will also act as the master servicer and the special servicer.

Among the strengths of the deal, according to DBRS, is the fact that the loans are generally of better quality than other distressed or re-performing portfolios that DBRS has reviewed. “The borrowers in the pool largely exhibit Alternative-A credit profiles and low current LTV ratios,” the presale report states. “In addition, borrower credit scores are generally stronger than other re-performing portfolios reviewed by DBRS.”

The rating agency also noted loan in New Residential securitizations generally prepay faster than similar deals from other sponsors, because the borrowers have clean payment histories and a significant amount of equity in their homes. This makes it relatively easy for them to refinance into a loan with a lower interest rate.

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