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%.

Pricing talk includes yields ranging from 4.9% on the AAA, class A1 notes; 5.7% on the AA, class A2 notes; and 6.2% on the AA M1 notes.

Yields are expected to range from 5.75% on the A1A notes to 6.55% on the M1, all priced on the three-month, interpolated yield curve.

KBRA says there is notable borrower equity in the properties collateralizing the mortgages, which is reflected in the weighted average original loan-to-value ratio of 71.7%.

Freddie's plan "has merit," but if also used by Fannie, it might create competition for many closed-end, second liens in PL RMBS, according to new research.

The nonpayment rate for non-qualified mortgages is up 21 basis points from February and 134 basis points from March 2023, Morningstar DBRS said.

The momentum created in the fourth quarter is continuing during the first months of this year and is likely to continue throughout 2024, according to Dv01's Vadim Verkhoglyad.

More than 55% of all purchase loans included in agency and government transactions were given to people who had not previously owned their residence, Intercontinental Exchange said.

Among the options is a synthetic risk transfer backed by a portfolio of about $5 billion of home loans originated when interest rates were lower.

Flat growth is expected for mortgages and auto loans, while credit card loan growth will slow down.

The coupons on the class A notes steps up after four years by 100 basis points, but the coupons are subject to a net weighted average coupon (WAC) cap.