Presale reports were released Tuesday on the 10th
Kroll Bond Ratings, Moody’s Investors Service and Fitch Ratings released presale reports with preliminary ratings on the Sequoia/Redwood transaction, Sequoia Mortgage Trust 2013-10, which is backed by more than $400 million in loans.
Kroll and Standard & Poor’s released presale reports with preliminary ratings on the JPM deal, JPMorgan Mortgage Trust 2013-3, which is backed by more than $345 million in loans.
All three of the aforementioned companies that issued preliminary ratings on the Sequoia/Redwood deal said they expect to assign their top ratings to 12 senior classes of the transaction, including some interest-only tranches.
Kroll and Fitch also assigned expected ratings ranging from a slightly lower investment grade AA(sf)/AAsf, respectively, to a speculative grade BB(sf)/BBsf, respectively, to four subordinate classes. Both said a fifth subordinate class that was not offered was not rated.
The transact is depicted as somewhat similar to other deals done by Sequoia/Redwood, the most regular issuer/seller in the post-downturn jumbo mortgage-backed securities market, with some nuanced differences.
“This transaction, unlike the majority of prior Sequoia transactions, features exchangeable securities which allow investors to exchange one combination of bonds for another,” Moody’s noted.
Analysts at Moody’s also noted, “The subordination of 7.25% in this transaction is higher than that of most other Sequoia deals that Moody's rated this year, and is driven by a slight weaker concentration of loans in the LTV range of 75 to 80 owing to the higher concentration of purchase loans.”
But otherwise, Moody’s found, “This pool is generally similar to prior Sequoia pools when comparing all other loan level risk characteristics.” Kroll noted that there were no interest-only loans in the pool.
Kroll found the geographic concentration to be “higher than four of the previous five SEMT transactions” and “approximately the same geographic concentration as in
Fitch found the percentage concentrated in the top three metropolitan statistical areas is 23.1% and concentration in California is 40.9%.
Originators selling into the loan pool continue to be diverse but have limited track records, with the top two representing a little over 16% of the pool being PrimeLending (8.5%) and WJ Bradley (7.59%), according to Kroll.
Fitch also noted Sequoia continues to use a representation, warranty and enforcement mechanism framework that “is viewed positively.”
Geographic concentrations for the JPMorgan deal are as follows, according to S&P: “Approximately 49% of the assets are located in California, with New York and Illinois having the second- and third-largest state concentrations at 17% and 7%, respectively.
“The New York concentration is due to the large number of First Republic loans and JPMorgan Chase loans. We note that this pool's geographic concentration is slightly higher than some of the more recent prime jumbo transactions in the market.”
As far as representations and warranties on the JPM deal, S&P notes that the company “has reconstructed its R&W framework to significantly reduce the required time and cost to make the determination as to whether a repurchase obligation exists, and to do so in a manner that is predictable for any given set of circumstances, and that is transparent to all parties at the time of securities issuance.”
S&P analysts said in their opinion the R&W approach “achieves this stated goal; however, it does so with a negative net credit impact.”
