RATE Mortgage Trust's latest securitization of prime mortgages will raise $362.2 million in securitized bonds, with the highest average loan balance and the highest concentration of single-family homes in about four years.
The deal includes a long series of tranches of class A notes that are a combination of exchangeable and interest-only notes, which are expected to pay coupons of 4.0% through 5.0%, according to Morningstar DBRS.
Also, tranches of class B notes will pay coupons of 5.83%, 5.50% and 0.33%, according to Fitch Ratings, which also rated the notes.
The notes all have a final scheduled maturity of April 2056, Fitch said. They have a seasoned probability of default of 6.4% and 1.3% on the 'AAA' and 'B' rating stress levels, respectively, according to DBRS.
J.P. Morgan Securities is an initial note purchaser, DBRS said, and the larger group includes Wells Fargo Securities, BMO Capital Markets and BofA Securities, the rating agency said.
Fitch notes that credit enhancement levels range from 15.0% on notes including the A9, A12, A18 and A27 tranches to 0.72% on the B5 tranche, Fitch said.
The deal will repay noteholders through a senior-subordinate and shifting-interest repayment structure. The subordinate classes receive only scheduled principal or prepayments for five years, Fitch said.
Despite these structural enhancements, RATE Mortgage 2026-J1 includes a stop-advance feature that could reduce interest on the securitized bonds if an underlying loan were more than 120 days delinquent, Fitch said.
The deal finances 293 underlying loans in the collateral pool, originated by Guaranteed Rate, with ServiceMac as the servicer. Some 96% of the loans financed single-family homes, including planned unit developments and townhomes, Fitch said. The rest of the pool is composed of loans financing condominiums and co-ops, according to Fitch.
As of the March 1 cutoff date, the loans had an average current balance of $1.2 million, according to DBRS and Fitch. Borrowers have an annual income of $583,067 and liquid reserves of $757,275 on a weighted average (WA) basis.
