In its third non-qualified mortgage MBS this year, New Residential Mortgage Loan Trust is planning to issue $346.1 million in non-prime mortgage-backed securities (MBS) to the market.
Known as NRMLT 2022-NMQ3, the transaction is sponsored by a real estate investment trust, New Residential Investment Corp. (NYSE: NRZ). Two subsidiaries of the REIT, NewRez and Caliber Home Loans originated all 595 loans in the pool that will serve as collateral for the issued notes, according to a pre-sale report from Kroll Bond Rating Agency.
Among the rating agency’s key considerations is that New Residential Investment Corp. is an experienced sponsor and originator. The public REIT has operated actively in the post-crisis, non-agency securitization market and has sponsored previous securitizations secured by an array of non-prime assets, including loans that are re-performing and seasoned so-called clean up calls. It also has extensive experience servicing advance receivables and newly originated non-QM asset types.
Slated to close on May 4, NRMLT 2022-NMQ3, the transaction uses a hybrid, pro-rata sequential payment structure based on certain performance triggers. Morgan Stanley and Amherst Pierpont Securities leads a slew of banks acting as initial note purchasers on the deal, according to KBRA.
Delinquency and cumulative loss triggers, plus excess spread, provide some credit enhancement to the notes. The $276.8 million class A-1 notes, which KBRA expects to rate ‘AAA.’ benefit from a rate step up after the trust’s payment date in May 2026.
A substantial majority of the loans in the pool are non-QM, 71.8%, while the remaining pool is categorized as exempt from the ability-to-repay/QM rules, because they were originated for business purposes on investment properties. About 11.9% off the loans in the pool were underwritten to the borrower’s income, and debt-service coverage ratios at the property level were used to underwrite 16.5% of the pool.
KBRA expects to assign ratings ranging from ‘AA’ on the $18.8 million A-2 class of notes to ‘B-’ on the $5.5 million, B-2 notes.
