Provident Funding Associates is preparing to sponsor a $331 million residential mortgage-backed securities (RMBS) deal, secured by mortgage loan payments from a pool of 587 agency-eligible loans.
Scheduled to close on February 5, PFMT 2026-1 will issue notes through tranches of senior, class A exchangeable notes and subordinate, class B notes, Kroll Bond Rating Agency said. They have a final maturity date of February 2026, the rating agency said.
Several banks are taking on critical roles on the deal, such as BofA Securities, which is the structuring lead manager.
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The pool of conforming loans are fully amortizing, primarily 30-year, fixed mortgages originated under the general qualified mortgage designation, and finance single-family homes, primarily, KBRA. Leverage levels are also moderate, with a weighted average (WA) original loan-to-value ratio of 65.7%, KBRA said.
KBRA noted two other characteristics that highlighted the quality of the pool. Just 37.3% of the pool received third-party due diligence, with findings that suggested a strong underwriting platform. Property inspection waivers were granted on 40.2% of the underlying mortgages, reflecting an increasing trend of agency mortgages being originated without them.
Primarily composed of first-lien loans, the mortgages have an average balance of $564,135, with a weighted average (WA) coupon of 6.00%. Borrowers have an original FICO score of 779 on a WA basis, and a debt-to-income ratio of 35.8%.
The three super senior notes benefit from credit enhancement levels representing 15.0% of the note balances. The A14 tranche of notes benefit from credit enhancement levels of 3.90%, KBRA said.
The subordinate notes also receive credit enhancement, at levels of 3.10%, 1.85%, 0.85%, 0.45% and 0.25%, respectively, the rating agency said.
KBRA finds that the AAA-rated super senior tranches, and the senior support tranche, offer a coupon of 5.0%.
Lower in the capital stack, the notional tranche of senior notes offers a coupon of 0.21%, and the senior depositable, notional notes, offer a coupon of 0.50%, KBRA said.
Outside of the senior notes, which were rated AAA, KBRA assigned AA+ to the B1 notes; A+ to the B2 tranche; and BBB, BB, and B to the B3, B4 and B5 notes.
