RMBS

Excess cash flow will pay timely interest and protect against realized losses in the rated certificates before being paid out to the class X notes.

Servicers—Citadel, NewRez and Selene Finance—will not advance any delinquent principal and interest. Eventually, that should reduce loss severities to the deal.

Investment properties are the primary properties backing the collateral pool, at 80.3%, while second homes account for 19.7% of the pool.

Portfolio enhancements and diversifications cushion the impact of the L.A. wildfires from RMBS losses.

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.