Wells plans 6th prime jumbo deal for 2020

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Wells Fargo Home Lending is sponsoring its sixth securitization of high-balance prime jumbo mortgages for 2020, as it nears topping the deal volume reached last year after it relaunched its post-crisis, private-label MBS platform.

Wells Fargo Mortgage Backed Securities (WFMBS) 2020-5 Trust is a transaction involving 493 large mortgage loans originated and serviced by Wells with an unpaid principal balance of $456.9 million, according to presale reports from Moody’s Investors Service and DBRS Morningstar.

The loans will back 20 super senior term notes with preliminary triple-A ratings from Moody’s (with DBRS Morningstar applying early AAA ratings to five of the tranches). Both agencies will also rate five classes of subordinate notes.

The transaction is the bank’s fifth rated prime jumbo qualified-mortgage securitization of the year, in addition to a $246 million non-qualified prime jumbo RMBS deal Wells priced last month (WFMBS 2020-RR1). The notes tally totals $2.05 billion across the five priced deals, meaning the Wells 2020-5 would push the platform past last year’s $2.3 billion in prime jumbo deals.

According to a presale reports, the pool has a weighted average FICO of 783 for borrowers with significant cash reserves ($423,953 on average) and monthly incomes, with clean-pay histories and none currently in a COVID-19 forbearance relief program.

The fixed-rate loans (nearly all 30-year terms) are seasoned an average of two months, with a high average balance of $926,802 due mostly to their concentration in high-cost housing markets in California (57.34%) and New York (10.17%). More than 36% of the mortgages by unpaid balance are refinance loans.

All of the loans were originated through Wells’ retail channel, and are deemed qualified mortgages in meeting the safe harbor provision of the Consumer Financial Protection Bureau’s ability-to-repay guidelines.

Moody’s noted one caveat to the deal: over 73% of the loans in the pool (by unpaid principal balance) lack a full appraisal, since the mortgage originations relied on home valuations that were mostly from exterior-only appraisal. Since the spring, Wells Fargo Home Lending has permitted appraisals without interior inspection activity for mortgage transactions due to COVID-19 risks.

The transaction is the 11th for Wells Fargo since 2018.

Moody’s expected loss for the pool is 0.19% of the note balance.

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RMBS prime jumbo MBS Wells Fargo