RMBS

The deal has a step-up coupon feature that calls for the fixed rates on classes A1, A2 and A3 to increase by 100 basis points, subject to the net weighted average coupon (WAC) after four years.

A vast majority of the collateral pool balance, 82.6%, are mortgages used to purchase primary residences, and just 17.4% finance second homes.

Alternative documentation accounts for 37.9% of the pool balance, compared with 24.6% on the 2024-NQM4 deal.

The deal mitigates mortgage-pool risk with CLO credit strengths

Unlike some recent RMBS deals, both exclude riskier interest-only loans and those supporting investment properties.

Top banks are underwriting the deal, but most of the securitization's loans lack documentation.

Underwriting methods have been steadily shifting to traditional full documentation, which accounts for 13.3% in the VERUS 2024-9, KBRA said, its largest share since VERUS 2024-6.

The notes benefit from credit enhancement levels of 30.45%, 24.3%, 13.8%, 8.65%, 5.00% and 2.05% on the A1, A2, A3, M1, B1, B2 and B3 tranches, respectively.

The deal will repay investors on a hyrid pro rata, sequential basis. Credit enhancement ranges from 51.7% on the class A1A notes to the 2.25% on the class B2 notes.

Underlying borrowers have accumulated significant amount of home equity in their homes, to a weighted average (WA) original cumulative loan-to-value (CLTV) ratio of 69.5%.